Azerbaijan remains highly dependent on the oil and gas sector, while its economic growth rates remain insufficient for a developing economy. This was stated by economist and chairman of the Republican Alternative (REAL) Party Natig Jafarli in an interview focusing on the economic prospects of Azerbaijan and the South Caucasus.

According to Jafarli, around 90% of Azerbaijan’s exports still come from oil and gas resources. Despite government efforts to develop the non-oil sector, significant economic diversification has yet to be achieved.

Jafarli noted that agriculture remains one of the areas with development potential. However, the sector faces a number of limitations and is heavily oriented toward the Russian market. In the economist’s view, sustainable economic growth requires deeper export diversification and greater access for Azerbaijani businesses to new markets.

Jafarli also addressed the reconstruction of territories that came under Azerbaijan’s control following the war. According to him, the government is allocating significant financial resources to rebuilding infrastructure in Karabakh. He estimates that total investment has already reached around €13–14 billion.

At the same time, the expert said that one of the main challenges is ensuring the economic self-sufficiency of the reconstructed territories and making them attractive for permanent settlement. Building roads, schools, hospitals and other infrastructure alone is not enough, he argued; it is also necessary to create jobs and establish sustainable economic activity.

Jafarli identified the development of Azerbaijan’s transport and logistics potential as another important element of the country’s economic strategy. He noted Baku’s efforts to turn Azerbaijan into a regional logistics hub and stressed the importance of new transport routes, including the proposed Zangezur corridor and alternative routes through Iran.

However, according to the economist, transit alone will not be sufficient to ensure long-term economic growth.

“It is important not simply to become a transit country, but to create conditions for international business”, Jafarli said, linking Azerbaijan’s prospects to attracting investment, developing production and creating additional services around transport routes.

Speaking about the future of the South Caucasus, Jafarli proposed considering a more ambitious model of regional economic integration. As an ideal scenario, he described the creation of a common economic space encompassing Azerbaijan, Armenia and Georgia, similar to the European Union.

In his assessment, such a model could reduce economic barriers between the countries of the region, expand markets and increase the South Caucasus’ attractiveness to major international investors.

 

Overall, Jafarli links Azerbaijan’s long-term prospects not only to the development of the non-oil sector and transport infrastructure, but also to deeper economic integration across the South Caucasus.

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08.08.2026 02:23