Economy—overview: Azerbaijan is less developed industrially than either Armenia or Georgia, the other Caucasian states. It resembles the Central Asian states in its majority Muslim population, high structural unemployment, and low standard of living. The economy's most prominent products are oil, cotton, and natural gas. Production from the Caspian oil field declined through 1997 but registered an increase in 1998. Negotiation of more than a dozen production-sharing arrangements (PSAs) with foreign firms, which have thus far committed $30 billion to oil field development, should generate the funds needed to spur future industrial development. Oil production under the first of these PSAs, with the Azerbaijan International Operating Company, began in November 1997. Azerbaijan shares all the formidable problems of the former Soviet republics in making the transition from a command to a market economy, but its considerable energy resources brighten its long-term prospects. Baku has only recently begun making progress on economic reform, and old economic ties and structures are slowly being replaced. A major short-term obstacle to economic progress, including stepped up foreign investment, is the continuing conflict with Armenia over the Nagorno-Karabakh region. Trade with Russia and the other former Soviet republics is declining in importance while trade is building up with Turkey, Iran, the UAE, and the nations of Europe. A serious long-term challenge is the maintenance of the competitiveness of non-oil exports in world markets.

GDP: purchasing power parity—$12.9 billion (1998 est.)

GDP—real growth rate: 10% (1998 est.)

GDP—per capita: purchasing power parity—$1,640 (1998 est.)

GDP—composition by sector:
agriculture: 22%
industry: 18%
services: 60% (1997 est.)

Population below poverty line: NA%

Household income or consumption by percentage share:
lowest 10%: NA%
highest 10%: NA%

Inflation rate (consumer prices): -7.6% (1998 est.)

Labor force: 2.9 million (1997)

Labor force—by occupation: agriculture and forestry 32%, industry and construction 15%, services 53% (1997)

Unemployment rate: 20% (1996 est.)

Budget:
revenues: $565 million
expenditures: $682 million, including capital expenditures of $NA (1996 est.)

Industries: petroleum and natural gas, petroleum products, oilfield equipment; steel, iron ore, cement; chemicals and petrochemicals; textiles

Industrial production growth rate: NA%

Electricity—production: 16.035 billion kWh (1996)

Electricity—production by source:
fossil fuel: 90.55%
hydro: 9.45%
nuclear: 0%
other: 0% (1996)

Electricity—consumption: 16.8 billion kWh (1997)

Electricity—exports: 600 million kWh (1996)

Electricity—imports: 745 million kWh (1996)

Agriculture—products: cotton, grain, rice, grapes, fruit, vegetables, tea, tobacco; cattle, pigs, sheep, goats

Exports: $781 million (f.o.b., 1997 est.)

Exports—commodities: oil and gas, chemicals, oilfield equipment, textiles, cotton

Exports—partners: CIS, European countries, Turkey

Imports: $794 million (c.i.f., 1997 est.)

Imports—commodities: machinery and parts, consumer durables, foodstuffs, textiles

Imports—partners: CIS, European countries, Turkey

Debt—external: $100 million (of which $75 million to Russia)

Economic aid—recipient: ODA, $113 million (1996)

Currency: manat=100 gopiks

Exchange rates: manats per US$1—3,865.00 (November 1998), 3,985.38 (1997), 4,301.26 (1996), 4,413.54 (1995), 1,570.23 (1994)

Fiscal year: calendar year