Azerbaijan: Economic and Political Overview
In this page: Economic Indicators | Foreign Trade in Figures | Sources of General Economic Information | Political Outline | COVID-19 Country Response
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Declining global gas and oil prices and the armed conflict between Armenia and Azerbaijan in Nagorno-Karabakh took a toll on the country’s economic growth in recent years. Nevertheless, after entering a recession in 2020, Azerbaijan’s economy rebounded in 2021 (+5.6%) and continued growing in 2022, with an estimated GDP increase of 3.7% according to the IMF thanks to the good performance of the non-oil sector, higher Russian remittances and a boost to the transportation sector following the Russia-Ukraine conflict. For 2023, the IMF expects lower oil and gas prices to weigh on the country’s energy sector (which accounts for more than half of the Azeri economy), with growth projected at 2.5% by the IMF.
The general government surplus was estimated at 10.6% of GDP in 2022, from 4.2% in 2021, driven by higher energy prices and strong non-oil receipts (Fitch Ratings). Additional extractive revenues were used to finance measures in favour of purchasing power, such as a food subsidy and a 20% increase in the minimum wage. As still-high oil and gas prices should counterbalance the increase in inflation-related social spending, the budget surplus is forecast at 6.7% of GDP for 2023. In 2022 Azerbaijan reinstated the limit on the growth of budget spending of 3% year-on-year and committed to a reduction in the non-oil primary deficit. Nevertheless, the debt-to-GDP ratio stood at 20.7% in 2022 but is expected to increase over the forecast horizon, to 22.1% this year and 23.8% in 2024 (IMF). Inflation rose to 12.2% in 2022 fuelled by a steep surge in food prices, exacerbated by disrupted imports from Russia and Ukraine. The central bank has tightened its policy, setting the main rate at 8.25% at the end of 2022. Real effective exchange rate appreciation and easing supply-chain disruptions should contribute to a reduction in inflation, projected at 10.8% in 2023 and 8% the following year. Overall, the country’s economic growth is still hampered by its dependence on the hydrocarbon sector and by the inefficiencies of the many state-owned enterprises.
After peaking in 2020, the unemployment rate returned on a downward path and stood at 5.9% in 2022. For 2023 and 2024, the IMF forecasts a rate of 5.8%. Azerbaijan’s GDP per capita (PPP) was estimated at USD 17,448 in 2022 (IMF). According to Asian Development Bank, 6.2% of the population lives below the national poverty line. Finally, the problem of corruption remains unresolved and may act as an impediment to the country's development.
| Main Indicators | 2020 | 2021 | 2022 (E) | 2023 (E) | 2024 (E) |
|---|---|---|---|---|---|
| GDP (billions USD) | 42.69 | 54.62 | 69.91 | 70.03 | 74.68 |
| GDP (Constant Prices, Annual % Change) | -4.2 | 5.6 | 4.6 | 3.0 | 2.6 |
| GDP per Capita (USD) | 4,241 | 5,398 | 6,826 | 6,757 | 7,121 |
| General Government Gross Debt (in % of GDP) | 21.3 | 26.4 | 20.7 | 22.1 | 23.4 |
| Inflation Rate (%) | 2.8 | 6.7 | 13.8 | 11.3 | 8.0 |
| Unemployment Rate (% of the Labour Force) | 7.2 | 6.0 | 5.9 | 5.8 | 5.8 |
| Current Account (billions USD) | -0.23 | 8.29 | 21.30 | 13.45 | 13.03 |
| Current Account (in % of GDP) | -0.5 | 15.2 | 30.5 | 19.2 | 17.4 |
Source: IMF – World Economic Outlook Database , Latest available data
Note: (e) Estimated Data
Azerbaijan has a workforce of 4.9 million out of its 10.1 million population (World Bank data). Its economy is based on gas and oil, steel, iron, chemical and petrochemical products, and textiles. Agriculture accounts for 5.9% of GDP and employs 36% of the population (World Bank, latest data available). The main crops include wheat, barley, corn, fruits (wine grapes), potatoes, cotton, tea, silk and tobacco. The country also produces other potentially valuable crops, including indigenous pink grapes and persimmon. According to official governmental figures, Azerbaijan's agricultural output in current prices amounted to USD 6.46 billion in 2022, up by 3.4% compared to one year earlier. Furthermore, exports of agricultural and agro-industrial products reached USD 912.4 million (+11.8% y-o-y), with vegetables and fruits accounting for 93% of the total export volumes.
Industry accounts for 48.4% of GDP and employs nearly 15% of the population (World Bank). Besides oil products and their derivates, Azerbaijan produces cement, machinery, cotton, and foodstuffs. The oil and gas industry accounted for around 95% of all industrial activity in the early 2000s, but the Azeri government has since implemented efforts to diversify the economy. The manufacturing sector is estimated to account for 7% of GDP (World Bank). In 2022 industrial products’ output reached AZN 86,0 billion, decreasing by 1,1% compared to 2021; the product output in the oil-gas sector decreased by 2,5%, while in the non-oil and gas sector it increased by 7,1%. 75,4% of industrial products were produced in the mining sector, 20,6% in the manufacturing sector, 3,4% in the production, distribution and supply of electricity, gas and steam, 0,6% in the sector of water supply, waste management and remediation activities (data State Statistical Committee).
Services account for 42.5% of GDP and employ 49.2% of the population. Flourishing service sectors include banking, construction and real estate. The latest figures from the Azerbaijan Tourism Board show that the country welcomed 1,459,000 international visitors from January to November 2022, marking a 111% rise in comparison to the same period one year earlier. The size of the banking sector relative to the economy in Azerbaijan is still small: the ratio of total banking sector assets to GDP stood at 47% as of 2020 (Black Sea Trade and Development Bank – latest data available).
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
|---|---|---|---|
| Employment By Sector (in % of Total Employment) | 36.0 | 14.8 | 49.2 |
| Value Added (in % of GDP) | 5.9 | 48.4 | 37.6 |
| Value Added (Annual % Change) | 3.3 | 2.0 | 9.3 |
Source: World Bank - Latest available data.
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| Monetary Indicators | 2016 | 2017 | 2018 | 2019 | 2020 |
|---|---|---|---|---|---|
| Azerbaijanian New Manat (AZN) - Average Annual Exchange Rate For 1 MUR | 0.04 | 0.05 | 0.05 | 0.05 | 0.04 |
Source: World Bank - Latest available data.
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The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.
Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation
The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.
Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024
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Trade represents 77% of Azerbaijan's GDP (World Bank, latest data). However, its foreign trade still relies heavily on the ex-Soviet bloc countries, especially Russia. Oil and gas represent over 90% of the country's exports. A significant part of the country's imports is made of capital goods, from machinery and vehicles to electrical equipment. Its oil and especially gas reserves provide the country with a degree of confidence for the coming years, but economic diversification remains a major problem to tackle. Other challenges include promoting more economic cooperation and openness and reducing the power of monopolies.
Azerbaijan's main export destinations are Italy (41.6%), Turkey (12.7%), Russia (4.1%) and Israel (4%) while the main import partners are Russia (17.7%), Turkey (15.8%), China (14%) and Germany (5.4% - Comtrade 2021 data). In the same year, Turkish-Azeri trade was estimated at around USD 4.6 billion, with both countries' governments targeting to raise total trade to USD 15 billion. Bilateral trade with Russia reached USD 3 billion, marking an increase of 12.1% year-on-year in 2021 (data State Statistical Committee).
According to WTO data, in 2021, Azerbaijan exported goods for a total value of USD 22.2 billion, while imports reached USD 11.7 billion. Exports of services amounted to USD 3.7 billion, against 5.9 billion in imports. After turning negative in 2020, the total external trade balance rebounded and was positive by 16.8% of GDP in 2021, according to the World Bank. The latest data from the State Customs Committee shows that in 2022, Azeri exports stood at USD 38.1 billion, with imports totalling USD 14.5 billion. Compared to the previous year, exports increased by 71.8% (thanks to the rise in global energy prices) and imports by 24.2%. As a result, the foreign trade balance was positive, with a surplus of USD 23.6 billion.
| Foreign Trade Indicators | 2017 | 2018 | 2019 | 2020 | 2021 |
|---|---|---|---|---|---|
| Imports of Goods (million USD) | 8,782 | 11,466 | 13,668 | 10,731 | 11,706 |
| Exports of Goods (million USD) | 15,476 | 20,317 | 19,636 | 13,470 | 22,207 |
| Imports of Services (million USD) | 8,004 | 6,679 | 6,303 | 5,386 | 5,918 |
| Exports of Services (million USD) | 4,661 | 4,661 | 3,727 | 2,594 | 3,795 |
| Imports of Goods and Services (in % of GDP) | 41.9 | 37.6 | 36.8 | 36.4 | 29.9 |
| Exports of Goods and Services (in % of GDP) | 48.5 | 54.1 | 49.1 | 35.6 | 46.7 |
| Trade Balance (million USD) | 6,115 | 9,841 | 8,533 | 2,512 | 11,274 |
| Trade Balance (Including Service) (million USD) | 2,735 | 7,779 | 5,917 | -329 | 9,151 |
| Foreign Trade (in % of GDP) | 90.4 | 91.7 | 85.8 | 72.0 | 76.6 |
Source: WTO – World Trade Organisation ; World Bank , Latest Available Data
| Main Customers (% of Exports) |
2022 |
|---|---|
| Italy | 46.6% |
| Türkiye | 9.3% |
| Israel | 4.4% |
| India | 4.4% |
| Greece | 3.6% |
| See More Countries | 31.7% |
| Main Suppliers (% of Imports) |
2022 |
|---|---|
| Russia | 18.8% |
| Türkiye | 15.8% |
| China | 14.4% |
| Germany | 4.5% |
| Turkmenistan | 3.5% |
| See More Countries | 43.0% |
Source: Comtrade, Latest Available Data
Source: Comtrade, Latest Available Data
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| 4.6 bn USD of services exported in 2018 | |
|---|---|
| 57.37% | |
| Personal travelPersonal travel | 44.36% |
| Business travelBusiness travel | 13.01% |
| 26.65% | |
| 11.51% | |
| 1.72% | |
| 1.18% | |
| 0.64% | |
| 0.38% | |
| 0.27% | |
| 0.27% | |
| 6.7 bn USD of services imported in 2018 | |
|---|---|
| 34.12% | |
| Personal travelPersonal travel | 29.65% |
| Business travelBusiness travel | 4.47% |
| 22.71% | |
| 19.89% | |
| 17.40% | |
| 2.41% | |
| 1.49% | |
| 1.10% | |
| 0.63% | |
| 0.25% | |
Source: United Nations Statistics Division, Latest Available Data
Other prominent parties include: Great Order Party, Democratic Reforms Party, Unity Party, Civic Unity Party, Azerbaijan Democratic Enlightenment Party, Republican Alternative, and National Front Party.
The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).
The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.
Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House
Regularly updated travel information for all countries with regards to Covid-19 related entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The UK Foreign travel advice also provides comprehensive travelling abroad advice for all countries, including the latest information on health, safety, security, entry requirements and travel warnings.
For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.
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Latest Update: September 2023
