Azerbaijan's growing GDP: Great endeavor in non-oil sectors for long-term economic stability [COMMENTARY]

In January-May 2024, the total domestic product amounted to 48,026.0 million manats, which is 4.2 percent more than the same period of the previous year. Compared to January-May last year, the production of added value in the non-oil and gas sector of the economy increased by 7.3 percent, while it remained at the same level in the oil and gas sector.

Of the GDP production, 39.7 percent is attributed to industry, 9.6 percent to trade and vehicle repair, 7.0 percent to transport and warehousing, 6.0 percent to construction, 3.8 percent to agriculture, forestry, and fishing, 2.4 percent to tourist accommodation and public catering, 1.8 percent to the information and communication fields, and 20.1 percent to other sectors. Net taxes on products and imports made up 9.6 percent of GDP. GDP per capita was 4713.3 manats.

Head of the Innovative Economic Research Center of Azerbaijan Technical University, professor, and economist Elshad Mammadov, stated to Azernews that state capital investments act as one of the main driving factors for the growth of gross domestic product in Azerbaijan.

“It is known that large investment projects, especially in the liberated territories, positively affect the country's economic growth. At the same time, it should be noted that economic and investment growth in a market economy should mainly be driven by private domestic investment institutions. Bank lending should play a decisive role in this context.”

“Furthermore, to promote GDP growth, we must import advanced technologies through foreign investments. Three key factors are crucial: developing internal investment institutions, importing advanced technologies, and executing large state investment projects, particularly infrastructure-related works. These three directions should positively impact the sustainable growth of the GDP,” E. Mammadov added.

According to him, in recent years, the country has faced significant economic challenges, including the effects of COVID-19, the global economic structure, and various crises. “These pressures highlight that only sustainable investment growth can ensure continued economic development. Additionally, there are serious methodological issues in calculating inflation and GDP worldwide, raising questions about the methodologies used. This suggests that relying solely on GDP as the primary development indicator is problematic,” the economist stressed.

“I believe that more effective indicators related to improving the real social well-being of the population can better evaluate the socio-economic agenda,” Elshad Mammadov concluded.

The impressive growth in Azerbaijan's GDP, particularly in the non-oil and gas sectors, reflects a diversification effort that is crucial for long-term economic stability. The significant contribution of the industrial sector (39.7 percent of GDP) underscores the importance of industrialization in driving economic development. However, this growth is not without challenges.

The emphasis on infrastructure development, as highlighted by Elshad Mammadov, is pivotal. The liberated territories offer a unique opportunity for large-scale investment projects that can transform these areas into economic hubs. The development of infrastructure in these regions not only supports economic growth but also enhances connectivity and accessibility, facilitating further investment and development.

Encouraging private sector investment, particularly through bank lending, is essential for sustainable economic growth. The private sector's involvement ensures that economic development is market-driven and resilient. Moreover, the importation of advanced technologies through foreign investments can significantly enhance productivity and competitiveness. This technological infusion can lead to innovation and efficiency across various sectors of the economy.

The global economic landscape, influenced by the COVID-19 pandemic and other crises, poses significant challenges. These global pressures necessitate a resilient and adaptable economic strategy. The methodological concerns in calculating inflation and GDP further complicate the economic analysis, suggesting the need for more comprehensive and accurate indicators.

Azerbaijan's economic growth in early 2024 demonstrates a positive trajectory, driven by strategic investments and sectoral diversification. However, addressing methodological issues and focusing on indicators that reflect real social well-being is essential for a holistic evaluation of economic progress. As Azerbaijan navigates global economic challenges, the integration of advanced technologies and the promotion of private sector investments will be crucial in sustaining and enhancing its economic growth.