Azerbaijan, a former Soviet republic in the South Caucasus, is experiencing high inflation and rising living costs as it grapples with the impact of regional tensions, especially the war in Ukraine.
According to official data, the inflation rate in Azerbaijan reached 13.9% in December 2022, the highest level since 2008. The main drivers of inflation are high oil and gas prices, which account for most of Azerbaijan’s export revenues, as well as rising food prices, food security issues, and spillovers from sanctions related to the war in Ukraine.
The war in Ukraine has increased geopolitical uncertainty and disrupted trade routes for Azerbaijan, which relies on imports for many essential goods. The sanctions imposed by Western countries on Russia have also affected Azerbaijan’s economy, as Russia is one of its main trading partners.
The high inflation has eroded the purchasing power of Azerbaijani consumers, who face higher costs for housing, transportation, health care, education, and other services. According to credible statistics organizations who compares living costs across countries, Azerbaijan ranks 133rd out of 227 countries in terms of cost of living index.
To mitigate the impact of inflation on the population, especially the poor and vulnerable groups, the government has announced several measures to increase pensions and wages, subsidize food products, stabilize exchange rates, and tighten monetary policy. However, some experts warn that these measures may not be enough to curb inflationary pressures and may have negative side effects on fiscal sustainability and economic growth.
Azerbaijan faces a delicate balance between maintaining economic stability amid high inflation and rising living costs while pursuing long-term development goals amid regional tensions.