From Reconstruction to Reality: Azerbaijan’s New Strategy Tests an Economy Losing Growth Momentum

Azerbaijan’s service economy is having a moment. In January-February 2026 the value of paid services sold to households rose by 8.9% in real terms, to 2.53bn manats.

The escalation of military tensions around Iran has driven a sharp rise in global oil prices, potentially bringing significant benefits to Azerbaijan’s energy-dependent economy while at the same time highlighting the country’s continuing reliance on hydrocarbon revenues.

Azerbaijan’s drive to modernise one of the South Caucasus’s oldest vehicle fleets is entering a more uncertain phase. After several years of tax incentives that fuelled a surge in hybrid imports, the government is withdrawing key exemptions — a move that risks slowing the transition from ageing internal combustion engines to cleaner models.

At the World Economic Forum in Davos, President Ilham Aliyev spoke at the Azerbaijan Executive Breakfast, a high-level event designed to present Azerbaijan not only as a resource-rich state but also as a strategic center for regional integration, economic diversification, and the attraction of foreign investment.