Azerbaijan: Economic and Political Overview
In this page: Economic Indicators | Foreign Trade in Figures | Sources of General Economic Information | Political Outline
Azerbaijan’s reliance on hydrocarbons for exports and fiscal revenue is its main vulnerability, with declining oil production, price volatility, and the global shift from fossil fuels posing long-term growth challenges. Moreover, private sector development is hindered by a large state presence, uneven competition, shallow financial markets, and weak human capital. 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. Following the strong rebound from the pandemic (+4.6% of GDP in 2022), growth moderated to 1.1% in 2023 and picked up to 3.2% in 2024, driven by a slower decline in oil output and positive spillovers from Karabakh reconstruction. According to the World Bank, the hydrocarbon sector is set to decline in 2025–2026 due to ageing oil fields, with gas output stabilising. Non-oil growth will slow as reconstruction winds down and consumption weakens. Without reforms, growth is expected to stay near 2.5%.
In recent years, significant efforts were made by authorities to reduce the non-oil fiscal deficit. Fitch Ratings estimates Azerbaijan's consolidated budget surplus dropped sharply to 1% of GDP in 2024, down from 7.8% in 2023, due to strong spending growth offset by non-oil revenue and SOFAZ asset returns. The surplus is expected to remain stable in 2025-2026, with lower oil prices partly offset by higher non-oil revenue, including the end of pandemic-related tax relief. Karabakh-related spending is likely to decrease, but social and defence spending pressures will limit significant cuts. Government debt reached 21.1% of GDP in 2024 and is projected to approach 23.3% by 2026 (Fitch). External debt has declined, with improved currency composition and two-thirds owed to official creditors. Government guarantees and on-lending fell to USD 5.6 billion (7.6% of 2024 GDP), mostly linked to the profitable Southern Gas Corridor project, which is unlikely to need state support. Average annual inflation dropped to 2.2% in 2024 from 8.8% in 2023, within the Central Bank’s target, as food prices rose by 1.3%, non-food products by 1.6%, and services by 4% (official governmental figures). In the medium term, it is expected to hover around 3.2% amid slowing domestic demand, assuming no major external shocks (World Bank).
After peaking in 2020, the unemployment rate returned on a downward path and stood at 5.4% in 2024, and is expected to remain stable over the forecast horizon (IMF). In Azerbaijan, inequality is deemed moderate in comparison to other transition and petroleum-rich nations. The majority of Azerbaijani citizens have reaped the rewards of the country's remarkable economic expansion: the GDP per capita (PPP) was estimated at USD 24,698 in 2024 by the IMF, and according to the World Bank, less than 6% of the population lives below the national poverty line.
| Main Indicators | 2023 (E) | 2024 (E) | 2025 (E) | 2026 (E) | 2027 (E) |
|---|---|---|---|---|---|
| GDP (billions USD) | 72.36 | 75.65 | 77.04 | 80.41 | 84.14 |
| GDP (Constant Prices, Annual % Change) | 1.1 | 3.2 | 2.5 | 2.4 | 2.4 |
| GDP per Capita (USD) | 7,145 | 7,381 | 7,428 | 7,661 | 7,921 |
| General Government Gross Debt (in % of GDP) | 21.8 | 20.5 | 20.3 | 18.9 | 17.5 |
| Inflation Rate (%) | 8.8 | 2.1 | 4.8 | 4.5 | 4.0 |
| Unemployment Rate (% of the Labour Force) | 5.5 | 5.4 | 5.3 | 5.3 | 5.2 |
| Current Account (billions USD) | 8.33 | 4.65 | 4.55 | 2.45 | 1.62 |
| Current Account (in % of GDP) | 11.5 | 6.1 | 5.9 | 3.1 | 1.9 |
Source: IMF – World Economic Outlook Database , Latest available data
Note: (e) Estimated Data
Azerbaijan has a workforce of 5.00 million out of its 10.15 million population (World Bank data). Its economy is based on gas and oil, steel, iron, chemical and petrochemical products, and textiles. Agriculture accounts for 5.5% of GDP and employs 35.5% 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 the State Statistical Committee, Azerbaijan's agricultural production amounted to 12.995 billion manat, reflecting a 1.5% increase compared to 2023. Livestock product production grew by 1.7%, reaching AZN 6.833 billion, while crop production rose by 1.1%, totalling AZN 6.162 billion. Furthermore, from January to October 2024, agricultural exports increased by 5.7%, reaching USD 603.5 million, while exports of processed agricultural goods surged by 60.3%, totalling USD 260.9 million.
Industry accounts for 46.6% of GDP and employs nearly 14.8% of the population (World Bank). Besides oil products and their derivatives, 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 rather limited, accounting for only 6% of GDP (World Bank). In 2024, industrial production totalled AZN 64.1 billion, a 1.1% increase compared to 2023. Oil and gas sector output rose by 0.5%, while non-oil and gas sector output grew by 7.3%. The mining sector produced 64.3% of industrial goods, followed by manufacturing (29.8%), electricity, gas, and steam production (4.9%), and water supply and waste management (1%). Marketable oil production in mining decreased by 3.6%, while marketable gas production rose by 6.2% (data State Statistical Committee).
Services account for 39.1% of GDP and employ 49.7% of the population. Flourishing subsectors include banking, construction, and real estate. The latest figures from the Azerbaijan Tourism Board show that the country welcomed around 2,626,000 international visitors in 2024, marking a 25.9% rise in comparison to the previous year. 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 40% as of 2023 (data Central Bank). Banks are the primary force in Azerbaijan's financial sector, possessing approximately 95% of its total assets (AZN 51.9 billion). In 2024, retail trade turnover in Azerbaijan reached 62.2 billion manat, according to the State Statistics Committee. Of this, 34.1 billion manat was from food, beverages, and tobacco, while 28.1 billion manat came from non-food products. Compared to 2023, retail turnover increased by 3.9% in real terms, with a 2.1% rise in food-related products and a 6.3% increase in non-food items.
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
|---|---|---|---|
| Employment By Sector (in % of Total Employment) | 35.5 | 14.8 | 49.7 |
| Value Added (in % of GDP) | 5.5 | 46.6 | 39.1 |
| Value Added (Annual % Change) | 3.0 | 1.3 | -0.2 |
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 84% 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 represented over 91.5% of the country's exports in 2023. The remaining part comprised food and live animals (2.5%) and chemicals and related products (2.1%). On the other hand, imports are more diversified and mainly comprise machinery and transport equipment (36.4%), manufactured goods classified chiefly by material (15.4%), food and live animals (12.3%), mineral fuels, lubricants, and related materials (11.5%), chemicals and related products, not elsewhere specified (11% - data State Statistical Service).
In 2023, Italy was by far Azerbaijan's main export destination, accounting for 44.9% of total exports due to increased gas supplies. Other major export partners were Türkiye (15.8%), Israel (4.1%), Greece (4.0%), India (3.6%), and Tajikistan (3.5%); while the main import partners were Tajikistan (18.3%), China (17.5%), Türkiye (13.3%), Germany (5.3%), and the U.S. (5.1% - data State Statistical Committee).
As per the WTO, Azerbaijan’s exports stood at USD 33.9 billion in 2023, down by 11.1% y-o-y amid lower hydrocarbon prices; whereas imports totalled USD 17.2 billion (+18.8%). As per services, exports increased by 23.4% to USD 6.2 billion, with imports following a slower pace (+11.5%), at USD 8.6 billion. The total external trade balance was positive by 14.5% of GDP, according to the World Bank, from a peak of 33% in 2022. According to preliminary figures from the State Statistical Committee, in January-November 2024, the country's foreign trade turnover totalled USD 42.81 billion. Exports accounted for USD 24.04 billion (56.2%), and imports for USD 18.77 billion (43.8%), resulting in a positive trade balance of USD 5.27 billion. Compared to the same period in 2023, trade turnover increased by 1.1% in nominal terms and 3.1% in real terms, with exports falling by 5.4% and imports rising by 0.6%.
| Foreign Trade Indicators | 2019 | 2020 | 2021 | 2022 | 2023 |
|---|---|---|---|---|---|
| Imports of Goods (million USD) | 13,668 | 10,732 | 11,703 | 14,540 | 17,285 |
| Exports of Goods (million USD) | 19,635 | 13,733 | 22,208 | 38,147 | 33,899 |
| Imports of Services (million USD) | 6,377 | 5,555 | 6,013 | 7,765 | 8,658 |
| Exports of Services (million USD) | 3,761 | 2,626 | 3,802 | 5,067 | 6,257 |
| Imports of Goods and Services (in % of GDP) | 36.8 | 36.4 | 29.8 | 27.0 | 34.6 |
| Exports of Goods and Services (in % of GDP) | 49.1 | 35.6 | 46.5 | 60.0 | 49.0 |
| Trade Balance (million USD) | 8,533 | 2,512 | 11,274 | 28,697 | 12,806 |
| Trade Balance (Including Service) (million USD) | 5,746 | -418 | 9,062 | 26,000 | 10,471 |
| Foreign Trade (in % of GDP) | 85.8 | 72.0 | 76.3 | 87.0 | 83.6 |
Source: WTO – World Trade Organisation ; World Bank , Latest Available Data
| Main Customers (% of Exports) |
2023 |
|---|---|
| Italy | 44.9% |
| Türkiye | 15.8% |
| Israel | 4.1% |
| Greece | 4.0% |
| India | 3.6% |
| See More Countries | 27.5% |
| Main Suppliers (% of Imports) |
2023 |
|---|---|
| Russia | 18.3% |
| China | 17.5% |
| Türkiye | 13.3% |
| Germany | 5.3% |
| United States | 5.1% |
| See More Countries | 40.5% |
Source: Comtrade, Latest Available Data
Source: Comtrade, Latest Available Data
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| 6.4 bn USD of services exported in 2022 | |
|---|---|
| 64.25% | |
| 18.49% | |
| 12.89% | |
| Personal travelPersonal travel | 7.04% |
| OtherOther | 22.87% |
| Business travelBusiness travel | 5.85% |
| 2.11% | |
| 0.76% | |
| 0.55% | |
| 0.33% | |
| 0.33% | |
| 0.25% | |
| 0.05% | |
| 7.7 bn USD of services imported in 2022 | |
|---|---|
| 40.92% | |
| 24.21% | |
| 15.30% | |
| 11.54% | |
| Personal travelPersonal travel | 9.27% |
| OtherOther | 64.25% |
| Business travelBusiness travel | 2.28% |
| 2.62% | |
| 2.56% | |
| 1.25% | |
| 1.00% | |
| 0.41% | |
| 0.19% | |
Source: United Nations Statistics Division, Latest Available Data
The National Assembly is currently dominated by the ruling New Azerbaijan Party (YAP), while independent deputies form the second-largest bloc. However, opposition parties in Azerbaijan often experience internal divisions, leading to frequent splintering and the formation of new parties. Among the more prominent political forces are:
Other active parties include the Great Order Party, Democratic Reforms Party, Unity Party, Civic Unity Party, Azerbaijan Democratic Enlightenment Party, Republican Alternative (REAL), and the 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
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Latest Update: May 2025
