Oliver Wyman: Azerbaijan could double its GDP by 2035 through targeted strategy and reform

With a growing and diversifying economy, Azerbaijan is on its way to doubling its GDP and soon joining the ranks of the smaller, but healthy and thriving EU economies like Czechia and Portugal. Part of the challenges on that path include pivoting towards services and leveraging rather than fully abandoning its hydrocarbon legacy.

A comprehensive economic report from management consultancy Oliver Wyman highlights the critical need for Azerbaijan to fundamentally transform its economic structure. Historically dependent on oil and gas extraction, it now faces the natural limits to its current growth trajectory.

The report suggests that by adopting targeted strategies it calls ‘Azerbaijan 3.0’, the nation can exceed historical growth averages and aim for higher-income status, with the end goal of doubling its GDP in the next decade to reach a total value between $150 billion and $165 billion. That would put Azerbaijan in the league of some EU countries in the upper-middle economic category (Czechia, Portugal, Greece, Hungary, Serbia, and others), with a GDP per capita between $23,000 and $32,000.

The lion’s share of Azerbaijan’s GDP is derived from the oil and mining industries, the source of 41% of total value. The manufacturing base in Azerbaijan is quite small, making up only 6% of GDP, which is the lowest share among all peer economies surveyed.

The services sector represents another notable gap, accounting for approximately 47% of the GDP in Azerbaijan. This is significantly lower than the 72% average observed in upper-middle productivity nations. The report notes that even when adjusting for oil and gas outputs, the expansion of high-margin services is an essential part of the roadmap towards becoming a stronger economy.

Value added in every sector analyzed is higher in the upper-middle productivity group. Even though agriculture constitutes a larger fraction of GDP in Azerbaijan, the value generated is relatively low.

Manufacturing accounts for about 16% of GDP in the upper-middle productivity group, compared with 6% in Azerbaijan. Services also make up a larger fraction of GDP in the upper-middle productivity group. Services create 4.1 times more value in the target productivity group than in Azerbaijan, and manufacturing creates 7.5 times more value. These observations show that the differences are related to productivity within each sector rather than the overall sectoral structure of the economies.

Leverage hydrocarbons, pivot to services

To replicate the rapid historical growth of peer nations, Oliver Wyman outlines four strategic bets centered on energy, logistics, and hospitality. The first initiative involves moving further downstream from raw oil and gas exports into high-value petrochemicals, polymers, and advanced materials.

In 2023, raw crude oil and gas made up $24.7 billion in output, while refined products and polymers together represented less than 5% of hydrocarbon exports. Shifting focus to complex downstream chemicals could unlock an additional $6–8 billion in value added by 2035.

The remaining three strategic choices require a decisive pivot toward a services economy. These include building a service-based energy trading hub, transforming the Middle Corridor from a simple transit route into an orchestrated logistics network, and unlocking the experience-based economy of Baku.

Evolving into a global logistics hub could contribute up to $2.7 billion to the economy by 2035, while sophisticated energy-adjacent services could secure $3–4 billion. In addition to that, maximizing tourism and travel is projected to generate up to $10.2 billion in GDP within the next decade.

Azerbaijan is already a noted destination for world travelers, but is still mainly a visited for events and short stays. With its Caspian atmosphere, culture, and food heritage, it has the potential to become a year-round hub for leisure-focused tourism.

Embracing global capital

Implementing these shifts will require Azerbaijan to proactively open its borders to foreign human and financial capital. The report indicates that the domestic pools of talent, capital, and specialized knowledge are structurally too thin to power this next wave of development endogenously.

Digitalization and AI continue to accelerate global productivity, amplifying the need for high-skill service workers. By importing foreign financial capital and advanced expertise, Azerbaijan can build necessary service clusters, modernize its legacy sectors, and successfully transition from a resource-dependent nation into a dynamic, knowledge-driven global marketplace.

By 2035, this transformation, in addition to the enhanced baseline GDP growth, could translate into a $150 billion economy. The report notes that this new economy should be around 60% services, 10% manufacturing, about 26% industry (including construction), and around 4% agriculture.

This shift would mean not just a larger economy, but also a fundamentally different structure, with a services-dominated growth engine. The potential for Azerbaijan is clear – and with bold new set of strategies, the country could easily set itself on a positive growth path.

“The economy of Azerbaijan is at a critical inflection point. With a combination of abundant natural resources, a strategic geographic position, and a rich cultural heritage, the nation has the potential to double its GDP in the next decade,” the report suggests.

“Azerbaijan 3.0 is not merely a growth target; it is a redefinition of where and how the country creates value. Such an approach would reposition Azerbaijan in the global economy from a producer of resources to a market maker of ideas, trade flows, financial agreement, and a wide range of experiences.”