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Azerbaijan strategy

Azerbaijan has a presidential form of government with powers concentrated heavily in the executive branch. President Ilham Aliyev has been in office since October 2003 and was re-elected for another five years in October 2013. Since coming to power, President Aliyev has steadily established his political authority. The ruling presidential party has a dominant position in the legislature and in the political system. The October presidential and upcoming parliamentary elections are unlikely to significantly alter the distribution of power during the Strategy period.

Strategy (315KB - PDF)

Local language translation (764KB - PDF)

Report on the invitation to the public to comment (62KB - PDF)

Challenges

The rate of economic growth has declined sharply from the pre-crisis boom years as the pace of hydrocarbon extraction has slowed. In 2011, GDP grew only 0.1 per cent on the back of 10.6 per cent fall in oil output. In 2012 growth picked up to 2.2 per cent as milder decline in oil production has been more than offset by the encouraging expansion of the non-oil sector (9.7per cent), led by construction and services. 

More recently, growth was 5.1 per cent for the first 9 months of 2013. The authorities’ recent statements suggest that the oil sector is likely to recover somewhat in 2013-14, although some observers believe it may have reached its historic peak and will continue to decline. Gas production is expected to grow significantly over the next Strategy period, which will partly mitigate the decline in oil production. The country’s large oil fund (50per cent of GDP) provides a significant buffer against shocks. 

Thanks to sustained growth driven primarily by oil production as well as social transfers, the poverty rate dramatically dropped from almost 50 per cent in 1999 to 6 per cent in 2012.

Azerbaijan has reached a critical stage in its development. With oil output set to decline from 2017 and the economy’s dependence on accumulated hydrocarbon revenues very high, diversification of the economy will be critical to ensure that Azerbaijan enters the post-oil period with a modern and vibrant private sector. Although the authorities have adopted ambitious targets for diversification under the Vision 2020 strategy and have made some progress in modernising the economy, structural reforms needed to support self-sustaining growth in the non-oil sectors should be accelerated.


Last updated 12 May 2014

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