Azerbaijan's Post-Oil Economy and the Middle-Income Trap: A Comparative Analysis

Abstract
This article examines Azerbaijan's post-oil economic trajectory and assesses the country's growing exposure to the middle-income trap. Drawing on retrospective macroeconomic data, medium- and long-term forecasts, and comparative evidence from Armenia, Georgia, and Kazakhstan, the study argues that Azerbaijan's hydrocarbon-dependent growth model has become increasingly unsustainable. While oil and gas revenues supported rapid growth during the boom years, declining oil production, weak diversification, low productivity growth, and reduced foreign investment have contributed to a sharp slowdown since 2016. The analysis shows that Azerbaijan is projected to underperform its regional peers in GDP growth, GDP per capita, innovation capacity, governance quality, economic freedom, and human development. Institutional constraints, monopolization, systemic corruption, and limited political and civil liberties further weaken the country's capacity for structural transformation. The article concludes that, absent comprehensive market-oriented reforms, stronger institutions, anti- corruption measures, and productivity-enhancing diversification, Azerbaijan is likely to remain trapped in the upper-middle-income category for an extended period, while Armenia, Georgia, and Kazakhstan are better positioned to converge toward high-income status.

Keywords: Azerbaijan; Kazakhstan; Armenia; Georgia; post-oil economy; middle-income trap; economic diversification; hydrocarbon dependence; institutional quality; governance; corruption; economic growth, freedoms