Baku: Azerbaijan’s banking sector has shown improved performance metrics, though potential challenges loom on the horizon.

According to Azeri-Press News Agency, international rating agency Fitch Ratings predicts a slowdown in Azerbaijan’s GDP growth, with projections of 3.5% in 2025 and 2.5% in 2026, down from 4.1% in 2024. This anticipated deceleration is attributed to a slowdown in the oil and gas sector, driven by lower global prices.

The report highlights that since 2017, the banking sector in Azerbaijan has seen improved average metrics, including reduced loan dollarisation and diminished legacy asset-quality risks. These improvements reflect a strengthened financial environment within the country.

However, the report also cautions about the rapid expansion of retail lending that has been occurring since 2021. This swift growth could lead to overheating risks within the sector. Despite these concerns, the central bank is actively implementing measures to mitigate credit risk in the retail lending segment, aiming to maintain stability.