Reasons for the decline in GDP in Azerbaijan in dollar terms

In the aftermath of consecutive devaluations in 2015, Azerbaijan struggles to return to pre-devaluation economic levels, raising concerns about the nation's overall growth trajectory. Despite a 1.1 percent increase in gross domestic product (GDP) in 2023, reaching 123 billion Manats (approximately $72.3 billion), the country lags behind regional peers.

While the Central Bank of Azerbaijan forecasts a modest 3-3.5 percent real economic growth in 2024, with the non-oil and gas sector expected to contribute 5-5.5 percent, some experts argue that the figures do not reflect a substantial recovery. This growth pales in comparison to neighboring countries like Georgia (7.5 percent), Armenia (8.3 percent), Russia (3.5 percent), and Kazakhstan (4.9 percent), highlighting Azerbaijan's economic challenges.

Rufat Guliyev, a member of the Milli Majlis Committee on Economic Policy, industry, and entrepreneurship, acknowledges the positive trend post-pandemic but notes that Azerbaijan's growth remains below global standards. In an interview with Turan, he explains the slowdown in growth by reducing oil production and stabilizing gas prices. However, he highlights a shift toward non-oil sector development, with more than 50 percent of GDP now originating outside the oil industry.

Guliyev emphasizes the significance of diversification and strengthening the economy for sustainable growth, expressing optimism about the impact of large-scale restoration and construction in the recently liberated territories. He anticipates increased economic growth, projecting a 3.5 percent overall growth and 5 percent non-oil sector growth in 2024.

Economist Natig Jafarli, on the other hand, raises concerns about the impact of the devaluation on Azerbaijan's GDP in dollar terms. Despite reaching $72.3 billion, the current GDP in dollars remains incomparable to the pre-devaluation levels. Jafarli explains Radio Azadlig's lower growth rate in 2023 to factors such as lower-than-expected oil prices, declining oil production, and systemic issues like a flawed tax-customs policy, insufficient support for small businesses, and a closed land border.

Jafarli contends that the non-oil sector's contribution to GDP is limited and even a 10 percent increase would have a marginal impact. He criticizes the government's classification of certain sectors, like electricity and gold production, as non-oil, arguing that they too fall within the realm of the resource economy.

As Azerbaijan grapples with these challenges, there is a growing consensus that sustained economic development requires addressing systemic issues, fostering non-oil sector growth.