Azerbaijan’s digital investment surges as its non-oil economy seeks new growth

The digital sector still accounts for a relatively small share of Azerbaijan’s economy, but recent figures show that it is growing significantly faster than the economy as a whole. The results for January-August 2026 are particularly notable in terms of investment: investment in the information and communications sector increased by 49.4% in real terms to ?320 million ($188.24 million). During the same period, the value added generated by the sector increased by 10.7% to ?1.775 billion ($1.04 billion).

These two figures actually illustrate the main question facing Azerbaijan’s digital economy. On the one hand, investment is increasing by 49.4%. On the other hand, the sector’s real value added is growing by 10.7%. In other words, the increase in capital investment is considerably higher than the sector’s current economic growth. This is not a problem in itself. In particular, returns from infrastructure-related investments may materialize over years rather than immediately. The main issue is how much additional value, productivity, new services and exports the ?320 million ($188.24 million) investment can generate in the coming years.

The information and communications sector currently accounts for 2% of Azerbaijan’s total GDP. In January-August, the country’s GDP amounted to ?87.7 billion ($51.59 billion), of which ?61.5 billion ($36.18 billion) came from the non-oil and gas sector. The ICT sector’s share of non-oil and gas GDP reaching 2.9% also shows that the sector is still relatively small. Nevertheless, while the non-oil and gas economy grew by 2.1% in real terms in the first eight months of 2026, growth in the information and communications sector stood at 10.7%.

The ICT sector is growing significantly faster than the economy as a whole. The bigger issue is what lies behind this growth and whether it is translating into higher productivity, stronger investment returns and greater economic value.

The sector providing ?2.748 billion ($1.616 billion) worth of services in the first eight months of 2026 presents an interesting detail in this regard. Of this amount, ?868 million ($510.6 million), or 31.6%, came from mobile communications, while ?455 million ($267.6 million), or 16.6%, came from internet services. Software development and related consulting services accounted for ?435 million ($255.9 million), or 15.8%, of total services. More interestingly, software development and related consulting services increased by 39.4% in real terms over the year. Growth in internet services stood at 21.3%, while information services grew by 13.4%.

These figures can be considered one of the possible signs of structural change in the ICT sector. Mobile communications is still the sector’s largest source of revenue, but the faster growth of software development and related services shows that activities generating higher added value are expanding.

This is precisely where the main opportunity for Azerbaijan emerges. The future of the digital economy will depend on how effectively Azerbaijan can turn better connectivity and wider digital access into higher-value economic activity. A greater economic impact can come from exporting software, cloud services, cybersecurity, artificial intelligence, data services and other digital products to regional markets.

The ?320 million ($188.2 million) invested in the ICT sector is significant, particularly when compared with the sector’s overall contribution to the economy. Azerbaijan’s total investment in fixed capital across the economy reached ?12.68 billion ($7.46 billion) in the first eight months of 2026, with information and communications accounting for approximately 2.5% of the total.

On the other hand, the fact that the average monthly nominal wage in the ICT sector reached ?2,137 ($1,257) in January-July 2026 is also noteworthy. This figure is significantly higher than the average monthly wage nationwide. At the same time, the number of employees working under employment contracts in the sector stood at 34,200 as of August 1. The sector currently employs a relatively small workforce, although its wage levels suggest room for further growth in higher-income employment.

As a result, the key indicator for Azerbaijan’s digital economy in the coming years should not be simply how many percent the ICT sector grows. More important questions will be how much productivity the investment generates, how much exports of software and digital services increase, how the number of highly skilled jobs changes, and how much the ICT sector’s 2.9% share of non-oil and gas GDP rises.

Azerbaijan is already investing more resources in digitalization. The main issue now is not for that investment to create greater consumption of digital services within the country, but to translate into the production of higher-value-added products and services and their expansion into foreign markets. If this happens, the sector that currently accounts for 2% of GDP could become a more significant pillar of Azerbaijan’s non-oil economy in the future.