High-Level Forum on Economic Diversification

The new normal of low oil prices has created a completely new environment for Azerbaijan's economy. The sharp decline in oil prices since the end of 2014 has led to a double devaluation of the local currency, which in turn has created large pressures on the financial sector.

Fiscal consolidation, monetary tightening and severe financial sector distress led to a decline in economic activity in 2016, the first decline during the last two decades, with a modest recovery in subsequent years. Today, the size of Azerbaijan's economy (in US dollar terms) is about 60 percent of its size in 2014.

Against this backdrop, the importance of economic diversification and non-oil sector development have become more acute. However, economic rebalancing would also entail more investment-friendly policies, improving physical infrastructure involving private sector participation, and easier access to capital. 

In recent years, the government of Azerbaijan has taken important steps toward reducing the country’s dependence on oil and gas, and diversification of the economy through enhanced participation of the private sector in ensuring sustainable growth. In response to the external shocks, the government also established the Financial Stability Council to help stabilize the economy and coordinate policies. 

Within its program of support to strengthen the country’s resilience to shocks and enhance its competitiveness, the World Bank Group has been cooperating with the government of Azerbaijan in many areas, with a special focus on building the country’s capacity for non-oil sector development and private sector participation.

This high-level Forum is a continuation of the dialogue to help the government of Azerbaijan achieve quick and sustainable results on non-oil diversification.