Azerbaijan in Mid-2025: A Landscape of Economic Shifts, Social Challenges, and Evolving Geopolitics

Azerbaijan is currently navigating a complex period marked by mixed economic indicators, pressing social issues, and a dynamic geopolitical environment. Recent data from the State Statistics Committee (DSK) and other reports highlight a nuanced picture of the country's development.

Economic Trends and Living Costs

The Azerbaijani economy experienced a modest increase in its Gross Domestic Product (GDP), which reached 72.43 billion manats from January to July 2025, a 0.9% rise compared to the same period last year. The per capita GDP stood at 7,077 manats. While the non-oil and gas sector showed growth with a 3.1% increase in added value, the critical oil and gas sector saw a 3.3% decline. For comparison, in 2024, the country's GDP was 126.3 billion manats, a 4.1% increase year-on-year, with a per capita GDP of 12,382.5 manats. Experts and some economists note that while GDP is a measure of economic activity, it does not fully reflect social welfare or the quality of life, as it primarily measures market transactions and does not account for environmental issues, healthcare quality, education, or inequality.

Industrial output, a significant contributor to the economy, declined by 2.3% in the first seven months of 2025, amounting to 36.6 billion manats. Production in the oil and gas sector decreased by 3.5%, although the non-oil and gas sector grew by 5.5%. The mining sector alone accounts for 61.5% of the country's industrial product, and Azerbaijan's exports are approximately 90% oil and gas. This aligns with observations of a decline in oil production and investment in the oil and gas sector in recent years.

Employment figures show a shift: as of 1 July 2025, there were 1.77 million paid employees. The state sector saw a decrease of 23.3 thousand employees compared to 2024, while the non-state sector gained 33.3 thousand employees. Despite official unemployment figures reported as 282.3 thousand as of 1 January 2025, independent economists suggest that this figure may not reflect the true situation, noting that it can be more challenging to officially register as unemployed than to find a job.

Citizens are facing increasing living costs, notably in the housing and food sectors. Housing market prices have surged by up to 14%, with the overall price index for January-June 2025 showing a 13.8% increase year-on-year. Property rights registrations have slightly decreased from over 207,000 to 204,494.

Meat prices, particularly for beef, have risen by approximately 15%, with a kilogram now costing around 16 manats in some regions. This follows a similar increase last year and is attributed to rising feed prices and reduced pasture areas, partly due to increased cotton cultivation. The situation may worsen as Kazakhstan and Kyrgyzstan, major suppliers of live animals to Azerbaijan, have extended their export bans. Azerbaijan imports about 20% of its meat demand from live animals, and per capita meat consumption in Azerbaijan stands at 45 kg/year, significantly lower than the international norm of 78 kg/year. Experts predict beef prices could exceed 20 manats in the near future.

Heating tariffs have seen a sharp increase in 2025. For metered users, the price per Gcal has risen from 8 manats to 21 manats, representing a 2.5-fold increase. For unmetered users, the monthly price per square meter has tripled from 15 qepiks to 45 qepiks. These increases are justified by high service costs, which are partially offset by state subsidies. However, "Azəristiliktəchizat," the state heating provider, operates at a significant loss, which grew to 118.21 million manats in 2023. Despite increased state subsidies, only 13.8% of households were supplied with central heating in 2024, indicating a failure to meet strategic development targets set in 2016 for communal services.

Agriculture and Demographics

In the agricultural sector, the harvest area for autumn-spring grain and leguminous plants decreased, but overall productivity increased. From 939.1 thousand hectares, 924.4 thousand hectares (98.4%) were harvested, yielding 2.97 million tons of produce with a productivity of 32.1 centners per hectare. While total yield increased by 1.2% despite a 5.7% reduction in cultivated areas, the wheat harvest specifically saw a 5.8% drop. Harvesting costs also rose by roughly 5 manats per hectare, influenced by a diesel price hike last year.

The Ministry of Finance reported that over 2.2 billion manats were allocated for agricultural subsidies and concessions from 2020-2024. Despite periodic increases in planting subsidy coefficients, there have been observed decreases in crop production for those plant types, and production volumes have not matched the amount of subsidies utilised. There are also claims in the periodical press of "paper farming" and violations in subsidy distribution due to illegal actions by some officials, though law enforcement agencies have not provided separate reports on this.

Demographically, Azerbaijan faces a significant challenge with its declining birth rate. In the first half of 2025, 45,616 newborns were registered, a 6.3% decrease from the previous year. The birth rate per 1,000 people fell from 9.6 to 9.0. This decline is particularly steep over the last decade, with a 60% reduction in births since 2014. The prevalence of male births (53.3% of newborns) over female births (46.7%) is attributed to selective abortions. Independent economists suggest that social factors, such as inflation eroding real wages, also contribute to the declining birth rate, especially since monthly child benefits were abolished in 2006. Despite the falling birth rate, the total population experienced a slight increase of 0.2%, reaching 10,241,722 as of 1 July 2025.

Justice, Human Rights, and Media Freedom

In the justice system, there was a decrease in prison escapes in 2024, with 19 individuals escaping, 10 fewer than in 2023. However, the number of people evading punishment increased to 55, and those on wanted lists rose significantly to 8,911 last year. There's also a growing concern over drug addiction, with 4,967 people registered for the first time in 2024, and a total of 40,490 individuals registered in medical institutions for drug addiction. Experts believe the actual number of drug users is much higher than official statistics.

Human rights organisations continue to report on the detention of journalists and public activists. Mahammad Kekalov, a journalist arrested as part of the "AbzasMedia case" and sentenced to 7 years and 6 months, was reportedly denied telephone contact with his lawyer. He, along with other "AbzasMedia" journalists and an "AzadlıqRadiosu" journalist, Farid Mehralizadeh, received lengthy prison sentences ranging from 8 to 9 years on charges of smuggling and financial crimes. All accused deny the charges, asserting their arrests are politically motivated due to their investigations into corruption. Local human rights groups claim there are over 370 political prisoners in Azerbaijan, a figure consistently denied by officials who state that individuals are prosecuted solely for criminal acts. The family of imprisoned public activist Baxtiyar Haciyev, sentenced to 10 years, expresses grave concerns about his health and legal situation, claiming he is subjected to rough treatment, denial of lawyer visits, and inadequate medical care.

Foreign Relations and Regional Dynamics

Azerbaijan's geopolitical landscape remains active. Its Naval Forces conducted tactical drills in the Caspian Sea on 14 August 2025, focusing on the "Protection and Defence of Marine Energy Infrastructure". These exercises occurred amidst heightened tensions with neighbouring Russia.

Relations with Russia have been strained following a police operation in Yekaterinburg on 27 June, which resulted in the deaths of two Azerbaijani-ethnic individuals and the detention of about ten. Subsequently, Azerbaijan detained Russian citizens on drug and cybercrime charges, and the leadership of "Sputnik-Azerbaijan" was arrested. The Russian Ministry of Foreign Affairs is now working with Baku on options for the early release of detained Russian citizens to stabilise interstate relations.

Meanwhile, diplomatic efforts between Azerbaijan and Armenia, facilitated by the United States, have seen progress. On 8 August, Azerbaijani, US, and Armenian officials signed a Joint Declaration in Washington, aiming to establish unimpeded communication between Azerbaijan's main territory and its Nakhchivan region through southern Armenia. The European Union has expressed strong support for these agreements and regional connectivity. Both Azerbaijani President Ilham Aliyev and Armenian Prime Minister Nikol Pashinyan engaged in telephone discussions with EU Council President Antonio Costa, who underscored the significance of the peace agreement and the new investment opportunities it could create. Armenia is also considering hosting the European Political Community summit in spring 2026. Following these developments, both Russia and Iran have issued criticisms against Azerbaijan.

Concerns also remain regarding information warfare, with a commission reporting continued "geopolitical manipulation" and data harvesting activities against Azerbaijan from a neighbouring country via Facebook. Cyberattacks on Azerbaijani media resources earlier in the year were traced to Russia.

Overall, Azerbaijan is navigating a period of economic adjustment, demographic shifts, ongoing human rights challenges, and a delicate balance in its regional and international relations.