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Estimating Potential Non-Oil GDP in Azerbaijan

Author

Listed:
  • Avaz Yusibov

    (Central Bank of Azerbaijan Republic)

  • Tural Yusifzada

    (Central Bank of Azerbaijan Republic)

  • Vugar Ahmadov

    (Central Bank of Azerbaijan Republic)

Abstract

This study assesses Azerbaijan’s non-oil potential growth and its interplay with capacity utilization and inflation dynamics. Utilizing multiple estimation techniques, non-oil potential output growth is consistently estimated at around 5%. While short-term GDP growth exceeding the estimated level might suggest overheating, firm-level data suggest otherwise. Drawing on monthly survey data from enterprises across various industrial sectors covering the period of 2019–2024, we find that elevated growth does not always lead to inflationary pressures, especially when firms operate below full capacity. In such cases, capacity utilization can increase without a significant cost increase. The findings of this study emphasize the importance of incorporating capacity utilization metrics into inflation monitoring and highlight the need for policy responses in emerging economies with structural supply-side constraints.

Suggested Citation

  • Avaz Yusibov & Tural Yusifzada & Vugar Ahmadov, 2025. "Estimating Potential Non-Oil GDP in Azerbaijan," Working Papers 2501, Central Bank of Azerbaijan Republic.
    • Handle: RePEc:aze:wpaper:2501
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    More about this item

    Keywords

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    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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