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- GDP (PPP):
- $96.8 billion
- 2.2% growth
- 5.4% 5-year compound annual growth
- $10,478 per capita
- Inflation (CPI):
- FDI Inflow:
Azerbaijan’s economic freedom score is 61.3, making its economy the 81st freest in the 2014 Index. Its overall score is 1.6 points higher than last year, reflecting improved scores in the management of public finance and property rights. Azerbaijan is ranked 13th out of 42 countries in the Asia–Pacific region, and its overall score is above the regional and global averages.
Over the 20-year history of the Index, Azerbaijan has advanced economic freedom significantly to become a “moderately free” economy for the first time in the 2014 Index. A series of major reform measures has enabled the country to rise from the status of economically “repressed.” Score improvements of 10 points or more have been achieved in nine of the 10 economic freedoms, and Azerbaijan’s overall improvement of 31.3 points is the biggest gain of any country.
By sharp contrast, Azerbaijan’s rule of law has deteriorated over the past two decades and remains fragile, and the level of corruption continues to be substantial. Deeper systemic reforms to strengthen the independence of the judiciary and the protection of property rights are critically needed to ensure the country’s continuing progress toward greater economic freedom.
Azerbaijan’s dispute with Armenia over the Nagorno–Karabakh region has cost tens of thousands of lives and the loss of about a fifth of Azerbaijan’s territory. A 2009 constitutional amendment abolishing presidential term limits allowed President Ilham Aliyev to be re-elected for a third term in October 2013. Oil and gas production, construction, and private investment are increasing, and exports of gas to Russia have also risen. In June 2012, Turkey and Azerbaijan agreed to build the Trans-Anatolian Natural Gas Pipeline, which will ease Europe’s dependence on Russian gas. Negotiations on accession to the World Trade Organization continue.
Although anti-corruption laws are in place, corrupt practices permeate all spheres of public life in Azerbaijan. About half of all citizens report having to pay bribes for such services as customs, education, land-related services, medical services, the police, registry and permit services, and utilities. The judiciary is burdened by non-transparent regulations and interference from the executive. Contract enforcement can be lax.
The top individual tax rate has fallen to 25 percent, and the top corporate tax rate remains at 20 percent. Other taxes include a value-added tax (VAT) and a property tax. The overall tax burden has risen to 12.8 percent of the domestic economy. Government spending is 34 percent of GDP, and public debt remains low. Withdrawals from the state oil fund have been increasing, cushioning public finances.
Business start-up has become simpler. Required procedures have been reduced to six, and no minimum capital is required. However, obtaining necessary permits takes more than 150 days. Despite the lack of a fully developed labor market, labor productivity growth has been slightly higher than wage hikes. Price controls are in place for most energy products, and monopolies and limits on imports also cause distortions in domestic prices.
Azerbaijan’s tariff rate is 3.9 percent. Weak legal institutions and non-transparent regulations act as barriers to trade and investment. The financial sector, dominated by banks, remains stable and relatively well-capitalized. The government has injected new capital into the majority state-owned International Bank of Azerbaijan, raising the state’s share in the bank to slightly over 50 percent.