Could the economy of Azerbaijan fall into the middle-income trap?

On October 23, Azerbaijan Railways (ADY) presented its first international Sustainability Report, prepared in collaboration with Deloitte, highlighting the company's achievements from 2021 to 2023 and its plans up to 2030.

The negative impacts of Azerbaijan's prolonged border closures, now nearing five years, on the labor market are starkly evident in official statistical figures and data related to self-employment and individual labor activities. A significant portion of the income of residents from border areas was derived from cross-border trade, the sale of goods, transport, public catering, and accommodation services. It is clear from our observations that the closure of the land borders has left those dependent on income from trade and services related to border activities with no choice but to seek alternative jobs and migration to meet their material needs.

Azerbaijan is divided into 14 economic regions, including the capital city of Baku[1], 67 administrative districts, 11 towns subordinate to the republic, six district-subordinate cities, 12 city districts, 262 settlements, 190 town territorial units, 40 sector territorial units, 1,724 village territorial units, and 4,244 villages[2]. In Azerbaijan, neither the districts nor the cities are considered independent subjects of the national economy.

Since March 2020, Azerbaijan's land and sea borders with Russia, Iran, and Georgia have remained closed. Every three months, the special quarantine regime has been extended, and the borders have not reopened so far. The most recent extension occurred on September 25, 2024, when the Cabinet of Ministers of Azerbaijan issued Decree No. 440[1], extending the special quarantine regime until January 1, 2025, to prevent the spread of COVID-19 and its potential consequences, despite the World Health Organization (WHO) announcing the end of the pandemic on May 5, 2023, after the virus claimed 69 million lives globally[2].