Moody's report: Azerbaijan embraces economic diversification beyond oil

Azerbaijan and Kazakhstan are actively reducing their reliance on the hydrocarbon sector and diversifying their economies, according to a recent report from the international rating agency Moody's.

The report highlights that both Azerbaijan and Kazakhstan, traditionally oil-exporting countries, have significantly lowered their dependence on the hydrocarbon sector over the years, per Caliber.Az.

This shift is evidenced by the increasing share of non-oil sectors in their GDPs compared to figures from a decade ago. Notably, both countries have seen substantial growth in their transportation and logistics sectors, which have been strengthened by the expansion of transit cargo shipments through the Trans-Caspian International Trade Route (Middle Corridor).

Moody’s analysts pointed out that the integration of CIS (Commonwealth of Independent States) countries into global value chains has become more prominent due to the growth in global trade passing through the region. According to the International Monetary Fund (IMF), countries such as Azerbaijan, Kazakhstan, Armenia, and Uzbekistan have been more successful in attracting foreign investments into manufacturing. This development has allowed them to benefit from new positions in global trade and industry, especially in light of decreasing Russian influence in the region.

In a bid to support economic growth and further diversification, the governments of these countries have launched large-scale national programs aimed at improving their competitiveness. These programs are reinforced by institutional reforms and significant public investments.

Furthermore, the report notes that authorities are encouraging private sector participation in financing these economic transformations by creating new investment opportunities. As a result, banks and development institutions are increasingly turning to long-term international borrowing.

Additionally, the report highlights that the intensified competition in Azerbaijan's financial sector is motivating smaller banks to seek funds from international financial institutions. While large local banks may issue eurobonds in the future, their total volume is expected to remain relatively small compared to bilateral financing sources.

This comprehensive shift toward economic diversification reflects the broader trend across the CIS countries to reduce their dependence on traditional sectors like hydrocarbons and develop more diversified and resilient economies.