EBRD outlines key priorities for Azerbaijan's economic development in 2025

The European Bank for Reconstruction and Development (EBRD) has identified improving state company management efficiency and economic liberalization as key directions for Azerbaijan's sustainable economic development in 2025, Report, informs citing the EBRD's report.

The EBRD emphasizes the need to implement the Organization for Economic Co-operation and Development's (OECD) corporate governance principles to improve state enterprise management efficiency. These measures should be accompanied by further economic liberalization and increased competition. The bank's experts note the importance of creating equal conditions for the private sector and reducing state presence in several economic sectors, which will help accelerate economic diversification.

The report pays special attention to renewable energy sources. To attract major investments in this sector, Azerbaijan needs to improve power grid capacity and ensure regulatory framework transparency.

According to the EBRD, economic growth has accelerated in 2024. Real GDP grew by 4.3 percent year on year in the first half of 2024 on the back of solid real income growth and strong public infrastructure investment.

Non-oil real GDP returned to robust growth of 6.8 percent year on year after a slowdown in 2023, while the oil and gas sector posted positive growth (0.6 per cent year on year) for the first time in two years as a result of a continued increase in gas production, the EBRD said.

“Energy exports and public investment will continue to drive short-term growth. The increase in demand for Azerbaijan’s energy products is expected to support export revenues, though oil and gas price volatility poses a risk. A solid level of foreign reserves and an ample sovereign fund provide a liquidity buffer against this risk. The government is, therefore, likely to enable a continuation of current

levels of public investment and expenditure. We forecast real GDP growth of 3.8 percent in 2024, moderating to 2.7 percent in 2025. The forecast is highly sensitive to fluctuations in oil and gas prices and geopolitical fragility in the region,” the EBRD said.

“Digitalization is continuing, with the removal of infrastructural constraints and improved cybersecurity. Investments in the physical network have increased the speed of the internet by one-third over the past year. Similarly, in 2024, the central bank enhanced requirements to improve information security in the financial sector, aimed primarily at strengthening data protection and minimizing cybersecurity threats,” the EBRD noted.

According to the bank, in 2024, the government announced the first renewable energy auction for a 100 MW solar power plant project in Garadagh: “New energy-efficiency bylaws have been adopted that regulate eco-design requirements and energy performance metrics for new buildings.”