(Current History) During its recent oil boom, Azerbaijan experienced more than a decade of fast economic growth. Between 2001 and 2011, gross domestic product grew tenfold, then peaked at $75 billion in 2014. Predictably, though, the bubble burst: in mid-2014, plunging global commodity prices sent the economy into a deep recession. The government increased borrowing and twice devalued the currency, the manat, reducing its value by half relative to the US dollar. GDP fell to $38 billion in 2016, down by half from its 2014 peak. By 2018, it had inched back up to nearly $47 billion.
Azerbaijan’s oil-based growth model is lopsidedly dependent on a sector that has very few linkages to the rest of the economy. Petroleum dependency undermines export-oriented manufacturing and agriculture. Moreover, growth is not development, and not all development is inclusive or environmentally sustainable. Oil-led growth not only incurs considerable costs in terms of environmental degradation, it is also temporary, superficial, and unsustainable in the long run. Oil prices are notoriously volatile, and what may look like a boom can turn into a bust literally overnight.
However, the choices that political leaders make matter a great deal, too. Petrostates—countries that depend heavily on oil for government revenue—are more likely than others to be ruled by authoritarian regimes, and tend to pursue shortsighted macroeconomic policies that benefit the interests of their elites. [...]
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