AZE.US
Azerbaijan’s economy recorded no growth during the first five months of 2026, even as tax revenues exceeded government projections, raising questions about what is driving the increase in budget income.
According to the State Statistical Committee, the country’s economy showed zero growth between January and May, while average annual inflation stood at 5.6%.
At the same time, the State Tax Service reported that tax revenues reached 8.84 billion manats during the first half of the year, exceeding the official forecast by 217.7 million manats.
Lawmaker Vugar Bayramov said weak overall GDP growth does not necessarily lead to lower tax collections because different sectors contribute to the economy and the state budget in different ways.
He noted that Azerbaijan’s oil industry contracted by 0.9% during the first five months of the year, largely due to declining oil production. The non-oil sector, however, expanded by 5.8%.
“A significant share of the taxes collected by the State Tax Service comes from the non-oil sector,” Bayramov said. “Its expansion increases the tax base and supports higher budget revenues even when overall GDP growth remains weak.”
Economist Natig Jafarli offered Globalinfo.az a different explanation, arguing that the increase was primarily driven by higher tax rates and new taxation mechanisms rather than stronger economic activity.
He said a 3% income tax was introduced for private-sector employees on January 1, while higher rates now apply to workers earning larger salaries.
“The increase in tax revenues is not the result of an economic recovery,” Jafarli said. “The main factors are higher tax rates and the introduction of new taxation mechanisms.”
The figures suggest that Azerbaijan’s rising tax revenues may reflect both growth in the non-oil sector and a heavier tax burden, rather than a broad-based expansion of the economy.
AZE.US