Azerbaijan's economic strategy: Non-oil exports on rise Caliber.Az review

A recent report from the World Bank (WB) Global Economic Prospects predicts a moderate global economic growth of 2.7% in 2025-2026, with inflation returning closer to target levels and monetary easing bolstering business activity. Similar projections were made by experts from the International Monetary Fund (IMF) and other institutions, who also highlighted the stabilization of global trade. This is particularly significant for Azerbaijan, which is actively working to boost its non-oil exports after a challenging year. According to the Center for Analysis of Economic Reforms and Communication (CAERC), non-oil product exports saw a nearly 7% increase in January–February 2025, signaling positive momentum in this key sector.

The year 2023, marked by a global recession, posed significant challenges to worldwide business activity, particularly in non-resource sectors. These inertial effects continued into 2024, impacting global trade and slowing economic growth. Azerbaijan was not immune to these external pressures, as the past two years saw a decline in export performance, particularly within the oil and gas sector. This decline was driven by high volatility, a drop in global hydrocarbon prices, and a reduction in oil production at key offshore fields.

Moreover, adverse external conditions and decreased demand in Azerbaijan’s trading partner countries contributed to a lack of significant growth in non-oil export figures. According to the CAERC, Azerbaijan's total non-oil exports in 2024 reached $3.4 billion, showing a modest year-on-year growth of just 0.3%.

Nevertheless, segments of the domestic agricultural and food sectors provided a growth of 11.3% in external supplies last year, reaching $1.03 billion. In the industrial sector, the highest export dynamics were recorded in the precious metals segment, with sales on foreign markets valued at $215.3 million, showing a 29.2% increase. Additionally, in 2024, the export of chemical industry products grew by 18.3%, totaling $293.7 million.

One way or another, the situation with Azerbaijan's non-oil exports may significantly improve this year due to positive trends in the global market. According to last year’s research by experts from the IMF, the global economy is gradually entering the upward phase of a multi-year cycle starting in 2025, and the IMF experts predict a “moderate growth regime” for the global economic system until the end of the decade. The current state of the global economy is characterized by the IMF as a "unique combination" of factors, and while global growth was estimated at 3.2% last year, a similar GDP growth is expected this year as well.

Similar trends are noted in the reports of specialized UN bodies and several other international financial organizations (IFOs), including the World Bank’s Global Economic Prospects report published in January 2025. The World Bank experts believe that this year, regions with emerging markets and developing economies show quite good growth prospects. In 2025, moderate growth is forecasted for East Asia and the Pacific, as well as Europe and Central Asian countries, reflecting a slowdown in some major economies. This is also reflected in a slight decline in the Purchasing Managers' Index (PMI) due to the tariff barriers introduced by the United States earlier this year. In contrast, a strong upturn is expected in South America and the Caribbean (2.5%), the Middle East and North Africa (3.4%), and especially in Southeast Asia (6.2%), supported by robust domestic demand. In 2026, an even greater acceleration of economic growth is anticipated in most of the mentioned regions.

Overall, experts from international financial organizations (IFOs) agree that the forecasts for "moderate growth" and other business optimism in the new economic cycle are largely tied to global efforts to combat tariff protectionism and "trade wars" in the policies of certain governments, as well as to improvements in labor productivity and the implementation of structural reforms in the economic cluster. Among other things, mainstream development directions include promoting competition and supporting the private sector in the non-oil sector, expanding the share of "green" trends in energy and manufacturing, accelerating the adoption of technological innovations, including in the field of digitalization and the implementation of artificial intelligence (AI) tools in business, and more.

In recent years, Azerbaijan has made considerable efforts to develop the aforementioned promising directions in the non-oil sector, including those with high export potential. In particular, in the field of green energy development, Azerbaijan is the absolute leader in the South Caucasus region, having significantly increased the share of renewable energy sources (RES) in the country's overall energy system over the past two to three years. 

Azerbaijan has accelerated the processes of digitalization in the public and corporate sectors, strengthened efforts to form a startup ecosystem and incubation centers, opened new venture funds, and initiated training programs for specialists in the software and artificial intelligence (AI) fields. Thanks to government policies aimed at creating a favorable environment and fiscal preferences, private investors have become more active, capitalizing on industrial clusters. 

Export-oriented Special Economic Zones (SEZs), a dozen tech parks, industrial districts, and around fifty agro-parks have been established across the country, including in the Karabakh region. All of these factors contribute to the process of the country’s new industrialization: in 2011, the share of the non-oil sector in GDP was 49%, while by the end of 2024, this figure had reached 68%. According to the medium-term development strategy for 2022-2026, Azerbaijan aims to increase non-oil exports by 1.8 times, non-oil GDP by 1.3 times, and raise the share of the private sector in gross domestic product to 88% by the end of 2026. Additionally, a target for Azerbaijan is to increase the total volume of non-oil exports to $5.3 billion by 2027.

To achieve these goals, Azerbaijan will need to address several tasks. One of the key challenges is increasing the production of non-oil products, a task that is being successfully addressed. Last year, the non-oil sector saw a growth of 6%, with the non-oil industrial segment showing a positive dynamic of 7%. These processes will continue to develop progressively: as Azerbaijan’s President Ilham Aliyev recently noted in an interview with Chinese TV channel CGTN, the country is continuing negotiations for its accession to the World Trade Organization (WTO), and to streamline these processes, it is accelerating efforts to develop its domestic non-oil industry and agro-processing sector, boosting its export potential to better prepare for the realities of global competition.

Equally significant is the diversification of the geography of Azerbaijan's non-oil product exports. Currently, over half of the country's non-oil export trade is concentrated in just two countries: Russia (34.5%) and Türkiye (18.1%). In response, efforts by the Export and Investment Promotion Agency (AZPROMO) and trade representations from the Ministry of Foreign Affairs have focused on increasing market access. These initiatives include organizing presentations, seminars, and facilitating Azerbaijani agricultural companies and SMEs' participation in international exhibitions and forums. Additionally, AZPROMO provides consulting services on market research and international certification procedures, all while promoting the "Made in Azerbaijan" brand.

A key priority for AZPROMO has been expanding sales of agro-industrial products to new markets, particularly in Eastern Europe, the European Union, and the Persian Gulf, along with the Middle East and North Africa. These regions are seen as vital due to anticipated economic growth and rising trade demand in the coming years, as highlighted by the World Bank and IMF forecasts for 2025–2026.

All of these efforts collectively yield positive results: according to the recent data from the CAERC, in January–February 2025, the total value of Azerbaijan's non-oil exports amounted to $485 million, marking a 6.6% increase compared to the same period last year. Notably, food exports during this period increased by 12.3%, reaching $153.9 million. In terms of value, exports of ferrous metals and their products grew by 66.9%, sugar and confectionery products by 47%, alcoholic and non-alcoholic beverages by 10.2%, chemical industry products by 30%, tea by 21.3%, and aluminum and aluminum products by 2.8%.