According to data from the State Statistics Committee, Azerbaijan’s economic growth rate in 2025 amounted to 1.4 percent, compared with 4.1 percent a year earlier.
Such a sharp slowdown looks especially striking against the backdrop of a relatively favorable external environment and once again raises the question of the real depth of structural change in the country’s economy.
The key reason for the “negative reflection” in dynamics lies on the surface — a decline in oil production. Despite consistent statements about economic diversification, dependence on the hydrocarbon sector remains system-forming. The so-called “Dutch disease” continues to hang over the economy, since no other sector is capable of offsetting the effect of an oil downturn. In 2025, despite all difficulties, the average price of Azerbaijani oil exceeded USD 70 per barrel, which only underlines the structural nature of the problem: the decline is driven not by prices, but by physical production volumes.
The paradox is that a country with more than a century of industrial oil production history is gradually facing depletion of its resource base. Even the most advanced technologies can only slow the pace of decline, but cannot reverse the trend. According to the State Statistics Committee, in 2025 Azerbaijan produced 27.7 million tons of oil, 4.7 percent less than a year earlier. Of this volume, 27.62 million tons accounted for commercial oil.
The main volume — about 23 million tons — was shipped via the Baku–Tbilisi–Ceyhan pipeline, which in 2025 also transported 4.122 million tons of oil from Kazakhstan and Turkmenistan.
At the same time, the statistics raise certain questions.
According to the SSC charts, peak production volumes in 2025 occurred in August and December. This means the summer peak coincided with the period when the Baku–Tbilisi–Ceyhan pipeline was operating intermittently due to the detection of organochlorine compounds in the second half of July. This objectively casts doubt on the correctness or interpretation of these indicators.
In 2025, Azerbaijan’s oil sector was also accompanied by problems in the gas industry. At the beginning of the year, gas exports came under pressure due to a force majeure situation on an offshore internal pipeline serving one of the two production platforms of the Shah Deniz field — in January, the Shah Deniz Alpha platform was shut down for almost three weeks. As a result of the year, gas production increased by only 1 percent, reaching 50.92 billion cubic meters. Of this volume, commercial gas amounted to 38.9 billion cubic meters, with growth of just 0.7 percent. The remaining gas was reinjected into reservoirs to maintain oil production levels.
Overall, in 2025, with a gross domestic product (GDP) of 129.1 billion manats, the crude oil and gas sector generated only 34 billion manats. Oil GDP declined by 1.6 percent, while non-oil GDP grew by 2.7 percent, reaching 92.3 billion manats. However, even this growth proved insufficient to compensate for the decline in the core sector.
Economist Natik Jafarli, in a comment to haqqin.az, noted that GDP growth of 1.4 percent in 2025 was the lowest among CIS countries. According to him, such weak economic activity inevitably depresses other macroeconomic indicators. The main factor is the decline in oil production, the effect of which is amplified by unfavorable price fluctuations. The statistics, Jafarli believes, clearly demonstrate that despite numerous development programs for the non-oil sector, Azerbaijan’s economy remains critically dependent on energy resources, primarily oil.
An additional element in the overall picture is the situation in gas chemistry. Gas in Azerbaijan serves as feedstock, among others, for the SOCAR Carbamide and SOCAR Methanol plants, but their output is recorded within non-oil GDP. In 2025, urea production fell by 10 percent to 587,000 tons, while methanol output dropped by 21.1 percent to 407,500 tons.
As the editors of haqqin.az learned, in November the SOCAR Carbamide plant was completely idle, though no official explanation followed. The reasons for the significant decline in methanol production also remain unclear.
Experts do not rule out that the state company SOCAR is forced to reallocate gas resources, reducing domestic processing in order to fulfill export contracts. At the same time, the output of these enterprises, like that of SOCAR Polymer, formally belongs to the non-oil sector and is reflected accordingly in statistics.
Polymer production in 2025, by contrast, showed confident growth. Ethylene output increased by 17.6 percent to 152.3 thousand tons, propylene reached 144 thousand tons with growth of 18.6 percent, and polyethylene rose to 147.5 thousand tons, 21.2 percent more than a year earlier. Almost all output from these enterprises is export-oriented; therefore, a decline in gas chemistry directly affects both the development of the non-oil sector and the country’s foreign currency revenues.
In industry as a whole, out of 63 billion manats in value added, only 21 billion manats came from the non-oil segment. Precious metals mining deserves separate mention. In 2025, Azerbaijan produced 2.965 tons of gold (up 11.3 percent), 3.65 tons of silver (up 14.5 percent), and 8,145 tons of copper, which is 32.6 times higher than in 2024. Such a sharp surge became possible thanks to the commissioning of new mines by Anglo Asian Mining and AzerGold. Yet even against record global gold prices, exports of precious metals remain incomparable with oil revenues.
Modest dynamics were also recorded in agriculture. Growth amounted to only 0.9 percent, with the sector contributing 14.2 billion manats to GDP, including 7.4 billion manats from livestock and 6.8 billion manats from crop production.
Livestock numbers declined by 1.2 percent, while growth of 1.7 percent was recorded only in poultry farming. In crop production, potato output fell by 0.3 percent, vegetables by 3.8 percent. At the same time, notable growth was shown in cotton (16.8 percent), sugar beet (13.2 percent), tobacco (28.9 percent), and tea (12.7 percent).
Grain and legume harvests totaled 3.376 million tons, up 3 percent.
The government, inspired by the development of the Middle Corridor, continues to bet on the transport sector. However, transport and warehousing added only 9.106 billion manats to GDP, increasing by just 0.3 billion manats compared with 2024. Total freight volume by all modes of transport in 2025 amounted to 243.2 million tons, up 1.8 percent. Maritime transport carried 9 million tons, road transport 151.7 million tons (versus 143.5 million tons a year earlier). Rail freight, by contrast, declined to 16.8 million tons from 18.6 million tons, partly due to repair works on the Baku–Tbilisi–Kars route.
The construction sector also failed to become a growth driver: its contribution to GDP amounted to 8.426 billion manats, compared with 8.48 billion manats in 2024. More positive dynamics were recorded in tourism, where value added increased to 3.57 billion manats from 3.09 billion, in trade — to 14.63 billion manats, and in information and communications — to 2.67 billion manats from 2.4 billion manats in 2024.
Taken together, these data show that measures to stimulate the non-oil sector are producing results, but they remain slow and insufficient to compensate for the structural decline in extractive industries.
Against the backdrop of continued oil production decline, the key question becomes whether Azerbaijan’s economy has enough time in reserve to wait for the full effect of diversification to materialize.
Lamiya Isayeva
