The Azerbaijani government needs to diversify its economy and pursue efforts to develop the renewable energy subsector, invest in flagship infrastructure projects, and advance its digitalization and technological development, the Asian Development Bank (ADB) said in its Extended Annual Review Report.
According to the ADB, notwithstanding the government’s efforts to diversify its economy, the oil and gas subsector remains the main driver of economic growth and source of revenues. “Azerbaijan has significant potential for renewable energy, as it is relatively sunny and windy. The Ministry of Energy has indicated that technical potential for solar is around 23,000 megawatts and for wind 3,000 megawatts.”
The bank stresses that the Azerbaijani government is developing a legislative framework to support the use of renewable energy.
The bank notes that Azerbaijan is an emerging economy with a large oil and gas subsector, accounting for at least 50% of gross domestic product (GDP) and 90% of the country’s exports.
“The economy rebounded in 2021, growing by an estimated 5.5%. Azerbaijan’s economic recovery in 2021 was led by the nonenergy sectors, with the non-hydrocarbon part of the economy posting 7.2% growth in 2021, driven by services and manufacturing.
Overall GDP growth was nevertheless weighed down by restrained oil production on the back of the OPEC+ oil production quotas,” reads the report.
“For the period April to June 2022, GDP growth reached a record high 58.8% year on year, supported by rising energy prices. The boost that Azerbaijan gets from high oil prices could nevertheless be short-lived. Overall global growth could be adversely affected by continued shutdowns in the People’s Republic of China related to COVID-19 and as Europe starts to feel the full impact of the Russian invasion of Ukraine.
Thus, real GDP growth is expected to average 18.0% in 2022 before moderating to 3.5% in 2023 as one-off growth factors diminish in importance. Real GDP growth is forecast to average 3.1% during 2023–2026.”
According to forecasts, the GDP growth rate of Azerbaijan is projected at 4.7% in 2022, 3.5% in 2023, 3% in 2024, 2.8% in 2025, and 3.2% in 2026.