The Current State and Future Prospects of Azerbaijan's Economy

In recent years, Azerbaijan has not only lagged behind the European and Central Asian regional indicators in terms of economic growth levels but also fell behind the average GDP growth rate of developing countries. The economic analysis and forecasts from the United Nations Department of Economic and Social Affairs indicate that in Least Developed Countries (LDCs), economic growth is expected to rise to as much as 4.8 percent in 2024 compared to the previous year. In LDCs, the average GDP growth in 2023 was 4.2 percent. For landlocked developing countries (LLDCs), a GDP growth of 4.7 percent is anticipated in 2024, which is close to the level recorded in 2023[1].

Azerbaijan is known worldwide as an oil country, and this is not without reason, as crude oil, petroleum products, and natural gas have constituted at least 90% of the country's exports over the past 15 years[1]. The oil and gas sector has also significantly contributed to the formation of GDP[2], attracting direct foreign investments[3], and maintaining fiscal stability[4]. From stabilizing the national currency[5] to preserving political[6] and social[7] stability at all levels, oil and gas resources have played a leading role in addressing these issues. On July 18, 2022, Azerbaijan signed a "Memorandum of Understanding on Strategic Partnership in the Field of Energy" with the European Union, driven by these political dividends[8].

30 years ago, on September 20, 1994, Azerbaijan signed a Production Sharing Agreement (PSA) with foreign companies for the development of the “Azeri-Chirag-Guneshli” (ACG) oil fields located in the Caspian Sea. The PSA for the ACG, initially set for 30 years, was extended on September 14, 2017, until the end of 2049, thereby commencing the second phase of the “Contract of the Century.”

The State Statistical Committee (SSC) and the State Customs Committee (SCC) have released data on Azerbaijan's economic performance for the January-August period, reaffirming that despite efforts toward economic diversification, oil continues to be the dominant driver of the country's GDP and export portfolio, including its contribution to the state budget.