Gas Instead of Oil: Can Azerbaijan Become the Region’s New Energy Hub?

Azerbaijan’s retail market in 2026 continues to demonstrate resilience, although growth rates are beginning to reflect deeper structural changes in consumption patterns and the broader economy. After several years of recovering consumer activity, the non-oil sector is facing a new reality: inflation is gradually constraining household purchasing power, while rising incomes are no longer generating the same expansion in demand as before.

Azerbaijan is experiencing one of the largest construction cycles since the oil boom of the 2000s. Cranes continue to dominate the skyline of Baku, the suburbs of Absheron are expanding rapidly, and the real estate market remains one of the primary destinations for private capital. Yet behind the façade of construction activity, a problem familiar to many rapidly urbanising economies is becoming increasingly visible: housing is becoming less affordable for the country’s own population.

In early spring, as tourists returned to the streets of Baku and construction crews continued raising new residential districts along the Caspian coast, economists in government offices were discussing a far less visible problem: why the country’s economy had nearly stopped growing despite large infrastructure projects and heavy state spending.

Azerbaijan’s economy entered 2026 in an unusual position: official statistics show near-zero GDP growth, yet shopping malls, car dealerships and the consumer lending market continue to display notable activity. This growing dependence on domestic consumption is gradually becoming one of the defining features of Azerbaijan’s economic model — and at the same time one of its key vulnerabilities.