Azerbaijan's economy is based on the production and export of oil and petroleum products, and therefore largely depends on world prices for this type of fuel. According to the World Bank, the country is among the top 10 countries in terms of the share of industry in the GDP structure (most of the industrial production is accounted for by oil production and refining).

Against the background of high oil prices (more than $ 100 per barrel of Brent) in 2012-2014, the country's real GDP, according to the IMF, grew by an average of 3.6% annually. After a sharp drop in oil prices (since the end of 2015 — less than $ 50 per barrel) Azerbaijan's GDP decreased by 3.1% in 2016. In the context of consistently low hydrocarbon prices, diversification and recovery of economic growth rates were the main goals of the government formed in 2018. According to the World Bank, in 2018-2019, the non-energy sectors of the economy grew at a faster pace than the extractive industry, while the state significantly increased investments in education and healthcare.

In 2020, in the context of the crisis caused by the COVID-19 pandemic, the price of oil fell below $30 per barrel of Brent for the first time since 2003, which was the main reason for the 4.2% drop in Azerbaijan's GDP. At the same time, timely measures of state support to the economy have mitigated the negative effects of the pandemic. In 2021, prompt vaccination of citizens and the gradual easing of quarantine restrictions, as well as the recovery of the global economy, combined with the first positive effects of reforms, led to an increase in the country's real GDP by 5.6% (the highest value in eight years). In 2022, against the background of geopolitical and regional instability, Azerbaijan's GDP growth slowed to 4.6%, according to the IMF and the World Bank. A sharper drop was avoided due to higher oil and gas prices.

Dependence on the oil and gas sector remains the main vulnerability of the country's economy. Thus, against the background of unfavorable price conditions for oil-producing countries in the hydrocarbon market in 2023, the growth of Azerbaijan's real GDP decreased to a moderate 1.1%. At the same time, in the medium term, stable growth rates of the national economy are expected to recover at the level of 2-3% due to the planned commissioning of new oil platforms. 

Against the background of the recovery of economic activity and consumer demand following the active phase of the COVID-19 pandemic, as well as an increase in government spending, price growth in Azerbaijan, according to the IMF, amounted to 6.7% in 2021 and 13.9% in 2022. Additional factors provoking increased inflationary pressure in 2022 were the increase in world food prices and the growing problems with the global supply chain. In this regard, since the end of 2021 The Central Bank of Azerbaijan has been gradually increasing the key rate, which remained at 9% per annum until October 2023.

In 2023, the country recorded a steady decline in the rate of price growth, which allowed the regulator to begin the process of easing its monetary policy. By August 2024, the level of the key rate in Azerbaijan has been reduced to 7.25%, that is, by 175 bps compared to the value of October 2023. In the medium term, inflation in the republic is expected to stabilize in the target range set at 2-6%, and therefore the country's central bank will continue to ease monetary policy.

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