Azerbaijan’s economy has been navigating a complex landscape characterized by the need for diversification and sustainable growth. As of July 2024, significant funds have been allocated from the State Oil Fund of Azerbaijan to enhance the living conditions of refugees and internally displaced persons, reflecting ongoing social priorities. However, the broader economic outlook suggests both challenges and opportunities that require strategic focus.

Economic Growth and Challenges

Despite being a part of the landlocked developing countries (LLDC), Azerbaijan’s economic growth has been relatively modest. The World Bank forecasts a 2.3 percent growth for Azerbaijan in 2024, which is considered low compared to other LLDCs. The global economic landscape, as outlined in the World Bank’s Global Economic Prospects report, anticipates a 3.1% growth in global GDP in 2024, with developing economies projected to grow at an average of 4%.

Azerbaijan’s reliance on its energy sector has highlighted vulnerabilities, especially with the World Bank predicting a decrease in energy GDP by 2.3 percent annually from 2024 to 2050. This underscores the urgent need for diversification away from oil and gas.

Prospects for Diversification

Efforts to diversify the economy are vital. The analysis from the United Nations Department of Economic and Social Affairs suggests that developing human capital, increasing private investments, and enhancing women’s participation in the workforce could significantly boost non-energy sectors.

1. Human Capital: Improving education and aligning workforce skills with market demands can foster long-term growth.
2. Private Investments: Creating a conducive business environment can spur entrepreneurship and increase investments to 20% of GDP by 2030.
3. Women’s Workforce Participation: Enhancing women’s roles in the economy can address gender disparities and unlock economic potential.

Strategic Reforms and Future Outlook

The need for economic reforms is clear. According to the World Bank’s Long-Term Growth Model (LTGM), implementing a package of reforms could increase GDP’s annual growth rate by an average of 1.7 percentage points by 2050. Such reforms are crucial for overcoming the anticipated economic difficulties post-2030, which could otherwise lead to a stagnation in per capita income due to declining energy revenues.

While Azerbaijan faces significant economic challenges, particularly with its dependency on energy exports, there are substantial opportunities for growth through diversification and strategic reforms. By focusing on qualitative growth indicators and addressing structural issues, Azerbaijan can better position itself for sustainable economic development in the coming decades.