Macroeconomy
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Azerbaijan is gradually entering a new phase in the development of its energy sector, where natural gas is beginning to assume the role that oil occupied for decades. While the country had been associated primarily with oil exports since 1997, Baku has been steadily expanding gas exports since 2007, transforming itself into one of Europe’s key energy partners.
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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.
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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.
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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.
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