This paper provides a comprehensive analysis of Azerbaijan's economic trajectory over three decades of post-Soviet transformation, emphasizing the interplay between hydrocarbon dependence, fiscal fragility, and institutional weakness. Drawing upon national statistics, official budget data, and projections by international financial institutions-including the World Bank, IMF, EBRD, and ADB-the study traces macroeconomic dynamics from 1996 to 2025 and examines long-term sustainability prospects through 2050. The findings reveal that while hydrocarbon revenues have enabled rapid early growth and large-scale public investments, they have simultaneously entrenched structural vulnerabilities. Declining oil production, exchange-rate rigidity, weak diversification, and opaque fiscal governance have left the economy increasingly exposed to external shocks and domestic inefficiencies. Institutionally, Azerbaijan's governance environment has deteriorated, characterized by shrinking civic space, weakened judicial independence, and rising authoritarian control over economic and financial institutions. These systemic deficiencies have undermined investor confidence, constrained innovation, and reinforced monopolistic market structures. The study integrates macroeconomic, institutional, and geopolitical dimensions into a unified analytical framework, demonstrating that Azerbaijan's short-term fiscal surpluses mask deeper mid-term vulnerabilities and long-term structural risks. World Bank long-term growth simulations project average annual GDP growth of only 0.5 percent between 2024 and 2050-insufficient to achieve high-income status within the century under current policy conditions. The paper concludes by identifying key reform priorities, including institutional modernization, fiscal transparency, exchange rate flexibility, and the promotion of innovation-driven non-oil growth, as essential for achieving sustainable and inclusive economic transformation in a post-oil future.
