Page 48 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.82, # 1, 2025, pp. 36-51

Since regaining independence, Azerbaijan has implemented substantial economic
reforms to counter external pressures and achieve macroeconomic stability—a vital
prerequisite for economic sovereignty. From 1995 onward, the country’s GDP began
to grow, hyperinflation subsided, and unemployment rates, which had peaked at 49%,
started to decline. The national currency, the manat, introduced in the early years of
independence, gradually stabilized against foreign currencies, contributing to a
noticeable rise in household incomes. Despite these early improvements, significant
breakthroughs in economic development remained elusive during the initial phase,
and both economic security and macroeconomic stability fell short of desired levels.
The turning point came with the signing of the 'Contract of the Century' in 1994 and
the subsequent launch of oil production and exports to global markets in 2006–2007.
This period ushered in rapid economic growth, with annual rates reaching 27–30%,
which solidified macroeconomic stability and underpinned Azerbaijan’s economic
security. Rising global oil prices propelled GDP growth, reduced unemployment to
its lowest levels—driven by job creation and the successful implementation of State
Programs for the Socio-Economic Development of Regions, which cultivated a
supportive environment for entrepreneurship—and kept inflation in check. The manat
even strengthened against foreign currencies, reaching an exchange rate of 1 USD =
0.78–0.79 manat until early 2015, while household incomes surged significantly.
However, the economy’s heavy reliance on oil made it vulnerable to a sharp drop in
crude oil prices beginning in 2015. This triggered a contraction in GDP and a
depreciation of the manat, resulting in two devaluations within the year, pushing the
exchange rate to 1 USD = 1.50 manat. The decline persisted until 2017, when the rate
stabilized at 1 USD = 1.70 manat.
In 2017, Azerbaijan embarked on a transformative phase of economic reforms that
marked a pivotal moment in stabilizing its economy. The manat’s exchange rate
stabilized, GDP resumed growth, foreign exchange revenues rose, and a strategic
policy to lessen the economy’s reliance on oil gained traction. Consequently, the
contribution of non-oil sectors to GDP expanded to 70%, reflecting a significant shift
toward diversification. In 2024, Azerbaijan’s GDP reached 126.3 billion manat,
reflecting a 4.1% increase from the previous year. GDP per capita rose to 12,382.5
manat. Of this total, approximately 85 billion manat—roughly two-thirds—was
generated by non-oil sectors. Agriculture, forestry, and fishing contributed 5.7% to
GDP. (Source: State Statistical Committee of Azerbaijan, https://stat.gov.az)
Food security is a vital element of economic security and a key priority in Azerbaijan’s
economic policy. Currently, 70–80% of the population’s demand for essential
agricultural goods—including crops and livestock products such as grains, meat,
dairy, poultry, eggs, and vegetables—is satisfied through imports. Annually, the
country allocates roughly $2 billion to import wheat, flour, and related products.

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