From being poor and down, Azerbaijan has
developed rapidly in recent decades through the
exploitation of the country's oil and natural gas.
However, the dependence on oil exports has made the
economy vulnerable to fluctuations in oil prices. At the
same time, the economic system is hampered by corruption
and lack of transparency.
During the Soviet era, Azerbaijan's economy developed
unilaterally. The country produced most commodities -
oil and agricultural products - for export to other
Soviet republics. The first few years after independence
were marked by major difficulties: political
instability, disruptions to former Soviet-Soviet trade,
old-fashioned equipment and lack of knowledge and
capital. In addition, there were costs for the war
against Armenia on Nagorno-Karabakh and refugee flows
caused by the war. Production collapsed in both
agriculture and industry, and the standard of living
fell. GDP was halved in the first half of the 1990s. The
transition from planning economics to market economics
Major imports by Azerbaijan, covering a full list of top products imported by the country and trade value for each product category.
The 1994 ceasefire in the War on Nagorno-Karabakh and
increased political stability under President Heidar
Aliyev created better conditions. A stabilization and
reform program started in 1995 in cooperation with the
International Monetary Fund (IMF) had favorable effects.
From 1996, GDP began to rise again slowly and the
previously soaring inflation fell.
In the first years after the turn of the millennium,
the economy grew by up to 10 percent per year. A peak
was reached in 2006 when growth was just over 34
percent, but then it dropped back to previous levels.
After a couple of crisis years in 2014–2015 due to
falling oil prices, Azerbaijan's economy is showing
growth again, albeit at modest levels. Forecasts for
2019 and 2020 have landed at just over 2 percent.
Inflation has fallen again after the crisis years.
Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including AZE which represents the country of Azerbaijan.
Growth has been highly concentrated on the oil and
gas industry and on industries that cooperate with the
energy industry, such as the construction industry and
the communications sector. Parts of the economy that are
not oil related have developed at a lower rate.
The deficit in the state budget has been relatively
low since the late 1990s, thanks to oil revenues.
Foreign debt has also been kept down.
Other factors in the economy are seen as less
positive. A major problem is the strong dependence on
oil revenues that has made the economy sensitive to
variations in world market prices. Energy accounts for
about 90 percent of the country's exports and
three-quarters of government revenue. From summer 2014,
oil prices fell sharply. To counteract the effects, the
central bank wrote down the value of the manate against
the dollar. The purpose was to strengthen the country's
competitiveness. When other countries also devalued
their currencies, the central bank released the value of
the mandate freely in 2015. The currency then dropped
one-third of its value, with the result that prices
rose, which triggered nationwide protests.
In early 2017, President Aliyev ordered the
government to implement major privatizations to
revitalize the slowed economy. After the 2018
presidential election, some key ministers were replaced.
Also in 2019, people in Aliyev's immediate circle were
petitioned in connection with the president openly
describing the government as brake pads in reform work.
The government has promised to expand other parts of
the economy, but it is primarily the oil industry, such
as the manufacture of plastics, that has continued to
develop. The conflict with Armenia over the
Nagorno-Karabakh enclave still creates barriers to
traffic and transport to the west. There is a railroad
between Baku and Moscow as well as between Baku,
Georgia's capital Tbilisi and Kars in northeastern
Turkey. By contrast, the railway from Baku through
Armenia to Nachichevan has been shut down since the war
in the early 1990s. Baku with the Caspian Sea's best
natural harbor has ancient traditions as a port city,
but has not been able to become a major international
port because the Caspian Sea has no connection with
Another problem is the lack of structural and
administrative reforms, including the tax system. The
privatization of large state-owned companies has been
slow, although the sale of small and medium-sized
enterprises was almost completed at the turn of the
The lack of democracy and transparency in the
government's actions make it difficult to assess the
effects of various measures. Corruption is an old
problem that permeates the whole of society. In the wake
of the economic transition, crime has risen, as has
It is uncertain how long Azerbaijan's oil resources
will last. In 1999, the government formed an oil fund,
supported by the IMF and the World Bank. The purpose of
the fund is to protect the domestic currency by keeping
revenues from oil exports in foreign currency outside
the domestic economy. At the same time, the fund will
serve as a future buffer and be used for investments in
infrastructure and social areas.
The number of foreign tourists has increased for
several years in a row, according to government
statistics. In 2018, the country received more than 2.8
million visitors from other countries. Most foreign
tourists come from Russia, Turkey and Georgia. The ones
that are increasing the most are travelers from states
of the Persian Gulf, not least Saudi Arabia.
FACTS - FINANCE
GDP per person
US $ 4,721 (2018)
US $ 46,940 million (2018)
1.4 percent (2018)
Agriculture's share of GDP
5.3 percent (2018)
Manufacturing industry's share of GDP
4.8 percent (2018)
The service sector's share of GDP
35.2 percent (2018)
2.8 percent (2019)
Government debt's share of GDP
18.8 percent (2018)
US $ 15,254 million (2017)
US $ 20,794 million (2018)
US $ 10 952 million (2018)
US $ 6,051 million (2018)
Commodity trade's share of GDP
69 percent (2018)
Main export goods
oil and gas, machinery, cotton, food
Largest trading partner
Italy, France, USA, Turkey, Russia, China, Germany