Azerbaijan’s economic resilience: Growth amidst challenges and vision for future

Azerbaijan's economic development model has established its credibility on the global stage. This perspective was articulated by President Ilham Aliyev during his speech at the economic meeting on September 26.

"We have built a strong economy relying on our own resources. We have established an independent economy; we are not dependent on anyone. Economic independence naturally provides us with great opportunities at the international level, allowing Azerbaijan to conduct an independent foreign policy with success, confidence, honor, and dignity, as we have done and will continue to do.

Successful politics is intrinsically linked to a thriving economy. These two elements are closely intertwined, with clear economic indicators serving as a testament to effective governance by the country's leadership. Let us examine the relevant data to illustrate this relationship.

As noted by President Ilham Aliyev, economic growth in Azerbaijan was 4.3 percent, which is a significant indicator, especially considering the geopolitical situation."

The economic growth of 4.3 percent in Azerbaijan can be considered significant for several reasons, especially in light of its geopolitical context:

Regional instability: Azerbaijan is located in a region with various geopolitical tensions, including conflicts with neighboring countries. Sustaining economic growth amidst such instability reflects resilience and effective governance.

Resource dependency: Azerbaijan's economy heavily relies on oil and gas exports. Fluctuations in global energy prices can dramatically impact economic performance. A growth rate of 4.3 percent indicates effective management of resources and diversification efforts, even when external conditions may be challenging.

Investment climate: Positive economic growth can attract foreign investment, which is crucial for development. If Azerbaijan is growing despite geopolitical tensions, it signals to investors that the country is stable enough to warrant investment.

Economic diversification: If this growth is happening alongside efforts to diversify the economy beyond oil and gas, it suggests that Azerbaijan is making strides in building a more resilient economy that can weather external shocks.

A growth rate of 4.3 percent is particularly impressive when considering the geopolitical challenges Azerbaijan faces, indicating both economic resilience and potential for future stability and development.

The president also discussed growth in the non-oil sector.

"The point of particular importance is that our non-oil sector increased by 7 percent. This shows that the steps taken to diversify the country's economy and the well-thought-out reform policy are bearing fruit," he said.

It should be noted that although the country primarily engages in traditional energy trade, economic diversification is being successfully implemented thanks to large-scale projects undertaken in recent years.

Particularly, the use of alternative energy sources is enhancing the country’s reputation in green energy production on the global stage. Azerbaijan's rich solar, wind, and hydro energy potential is recognized by other countries, leading to significant investments from global companies.

In general, it is worth noting that the lands freed from occupation by President Ilham Aliyev have been declared a "green energy" zone. The investment of influential companies in these areas, particularly in renewable energy resources, indicates successful cooperation and effective diplomacy.

Let’s recall the president's speech:

"I should also state that in recent years, the production of oil from projects implemented by foreign oil companies has been decreasing year by year, which naturally had a negative impact on our overall economic development. We have been compensating for this decline with the growth of the non-oil sector. However, through negotiations with foreign oil companies, we brought attention to the deficiencies in oil production and requested that they be addressed to ensure stability. Recently, very active work has been carried out in this direction, and as a result, we have reasonable hopes that there will be no further unwarranted decline in oil production."

The president emphasized that government institutions and the SOCAR company are responsible for these issues, asserting that obstacles to Azerbaijan’s economic development will be addressed going forward.

"Stable oil production must be ensured next year. We are currently working on several new projects in the oil and gas sector, which will yield new production forecasts. Next year, we will likely see new projects and new deposits producing larger volumes of natural gas and oil condensate. I believe the outlook for the oil and gas sector will be positive."

It should be noted that the confirmed reserves of the "Shah Deniz" field in the Azerbaijani sector of the Caspian Sea are estimated at approximately 1.2 trillion cubic meters. The discovery of the "Umid" and "Babek" fields further enhances Azerbaijan's gas potential. Currently, 3.1 million cubic meters of gas and 470 tons of condensate are produced daily from four operational wells in the field. Since production began in 2012, approximately 6.7 billion cubic meters of gas and 1 million tons of condensate have been extracted. Two additional wells are planned for drilling and commissioning from the "Umid-1" platform. Azerbaijan's new gas fields enable further expansion of gas exports alongside renewable energy development.

Additionally, Azerbaijan, a key partner of the European Union in the South Caucasus, plays a decisive role in delivering Caspian gas resources to the EU market via the Southern Gas Corridor. The president has indicated plans to increase gas exports to Europe by 20 billion cubic meters by 2027, noting that this is a minimal target as Azerbaijan's energy potential exceeds this limit.

It is important to highlight that Azerbaijan cooperates with Europe not only in traditional energy but also in alternative energy. According to the "Agreement on Strategic Partnership in the Development and Transmission of Green Energy," signed in Bucharest on December 17, 2022, Azerbaijan, Georgia, Romania, and Hungary have formed a collaborative framework. The "Caspian-Black Sea-Europe Green Energy Corridor," or "Black Sea Cable," envisions transporting green energy generated by Azerbaijan’s wind power plants to Romania and Europe.

Stating that the main goals are the diversification of the country's economy and the improvement of the sustainable development model, President Ilham Aliyev also noted the positive indicator of inflation.

"Inflation has been slightly over 1 percent since the beginning of the year. This is a very positive indicator. I have already stated that the minimum wage and minimum pension will be increased next year, even though inflation is at a very low level. The tasks facing the country require substantial financial resources, particularly for the development of the military, the military-industrial complex, and the restoration of Garabagh and Eastern Zangazur. Despite all this, we are doing our best to improve the well-being of our vulnerable citizens."

In conclusion, Azerbaijan's economic trajectory showcases a successful blend of political stability and strategic resource management. With a reported growth rate of 4.3 percent and a 7 percent increase in the non-oil sector, the country is not only addressing immediate economic challenges but also laying the groundwork for future prosperity. As Azerbaijan continues to invest in both traditional and renewable energy sources, it stands poised to enhance its role as a key player in the global energy market, while ensuring the well-being of its citizens through prudent economic policies and initiatives.