Non-oil sector as a driver of Azerbaijan's economic growth President Aliyev’s assessement

Having successfully overcome the negative impact of last year's global recession, the economy of Azerbaijan, especially its non-oil sector, has been growing steadily this year. Inflation and external debt have been declining in the country, while foreign exchange reserves have been increasing, and large-scale work to revive the Karabakh region is ongoing.

Achievements in the socio-economic sphere, strengthening of macroeconomic stability, efforts to stabilise production in the oil and gas sector, as well as the development of non-oil production in industrial clusters were touched upon in the speech of Azerbaijani President Ilham Aliyev, who spoke at a meeting devoted to economic issues.

“There are only three months left until the end of this year. In general, I must say that economic development since the beginning of the year has been at the expected level. At the beginning of the year, when talking about how successful this year would be in economic respect, I mentioned that I was sure that this year would be successful for our economy. The results and economic indicators available since the beginning of the year confirm my words. Economy grew by 4.3 per cent. When analysing the processes taking place in today's world and looking at the geopolitical situation in general, I can say that this is a very positive indicator. Economic growth rates exceed those of many developed countries. Of particular importance is the fact that our non-oil sector has grown by 7 per cent. This also shows that the steps taken towards diversifying the country's economy and the thought-out reform policies are bearing fruit,” President Aliyev said.

It is worth recalling here that, according to recent data from the State Statistics Committee, the nominal volume of Azerbaijan's GDP in January-August of this year exceeded 80.96 billion manats ($47.6 billion), with real growth estimated at 4.3%. At the same time, the growth dynamics in non-resource sectors was almost twice as high, and industry accounted for almost 38% of the GDP structure. These are very good indicators, especially given the high level of volatility in world hydrocarbon prices observed since the beginning of the year. In general, the importance of the non-energy sector is growing year after year, and this is an extremely positive factor for the country's economy. If in the first half of 2023 the share of the non-oil sector in the GDP structure was 60%, then in the first half of this year this figure increased to 65.18%.

“In recent years, the production of oil under projects implemented by foreign oil companies has been declining year after year, which has naturally had a negative impact on our overall economic development rates, and we made up for this decline through the development of the non-oil sector. However, as a result of negotiations with foreign oil companies, the drawbacks in oil production were brought to their attention, we demanded that they eliminate these drawbacks and ensure the stability of oil production. Very hard work has been done in this direction in the last few months. As a result of this work, reasonable hopes have arisen that there will be no further unfounded declines in oil production,” the Azerbaijani leader noted.

The head of state emphasized that government agencies and the State Oil Company of Azerbaijan (SOCAR) will consistently pay attention to the further progress of these works, and expressed hope that the main factor restraining the country's economic growth will be eliminated, and stable oil production will be ensured in 2025. The president recalled that work is currently underway on several new projects in the oil and gas sector, as a result of which new production forecasts have been prepared. Probably, as early as next year, within the framework of new projects, at new fields, the production of natural gas and oil condensate will increase, as a result of which the dynamics in the oil and gas sector will become positive.

In this regard, it should be recalled that in the recent period, the AIOC operator, BP, has been constantly consulting with the government of Azerbaijan and SOCAR on issues of improving the management efficiency of the Azeri-Chirag-Gunashli (ACG) oil field block until 2049. In particular, serious discussions are underway on the problem of reducing oil production, extending the service life of reservoirs and maximizing the efficiency of production both due to the technical capabilities of BP as an operator and the technical capabilities of SOCAR. In general, work on developing the ACG reserves is continuing successfully, and, according to experts, this field has at least 500 million tons of unproduced oil reserves.

“But of course, our main goal is to further diversify our economy and improve the sustainable development model. Azerbaijan’s economic development model has already proven itself in the world. We have built a strong and independent economy based on our own resources and not dependent on anyone. Economic independence naturally gives us great opportunities at the international level, so that Azerbaijan can conduct an independent foreign policy with success, confidence, honor and dignity - as we have done and will do. In other words, all these issues give grounds to say with absolute certainty that the rates of economic development will be maintained until the end of this year and – considering the fact that the discussion of next year's budget is currently underway and budget parameters will be more extensive – economic development will also be at an adequate level.”

The most important factors for the successful development of the domestic economy include the stability of basic macroeconomic indicators: thanks to the reduction and stabilization of food prices around the world this year, the pressure of the imported inflation factor has noticeably decreased, which, together with efforts to strengthen the nominal effective exchange rate of the manat, helped stabilize the growth of consumer prices in our country. Noting that inflation since the beginning of the year amounted to slightly more than one per cent, the head of state recalled that in terms of the ratio of external debt to gross domestic product, Azerbaijan is among the leading countries in the world: "It accounts for only 7.5 per cent, which allows us the opportunity to spend less money on the repayment of foreign debt in the future."

In terms of total external debt to GDP, Azerbaijan has taken one of the leading positions over the past decade not only in the post-Soviet space, but has remained one of the best in the Central and Eastern European region. It is also important that Azerbaijan has a powerful financial safety cushion, which ensures stability and reduces risks in the area of ​​the country's debt obligations. According to the Central Bank, Azerbaijan's strategic gold and foreign exchange reserves have currently reached $73 billion, and this financial buffer continues to play a huge role in ensuring the country's monetary stability.

A number of promotion projects are underway to attract foreign investment, especially to the non-oil sector. The stability and predictability prevailing in Azerbaijan, as well as the strengthening of the state of Azerbaijan, the complete restoration of our territorial integrity and sovereignty have naturally improved the attitude of foreign investors towards us, although there has been a very positive investment climate in Azerbaijan for many years. According to the per capita volume of investments, Azerbaijan is among leading countries. The recent years, especially after the anti-terror operation, the complete restoration of our state sovereignty, naturally sent a very positive signal to all investors, and we are now seeing the fruits of that. 

The head of state recalled that new enterprises are opening in traditional industrial zones - in Baku and Sumgait, industrial parks, while new agro-industrial clusters are being created in the liberated territories - in the Aghdam and Jabrayil regions. And this should be regarded as a very positive fact that contributes to the capitalization of the manufacturing sector, the development of modern industry and, in general, an increase in the volume of Azerbaijan's GDP.