doi.org/10.52340/eab.2026.18.01.04.

In the Republic of Azerbaijan, efforts to activate internal drivers of economic growth are unfolding against a backdrop of rising uncertainty and instability in global economic development. Within this context, the emphasis is placed not on gross growth, but on inclusive economic growth. Inclusive growth permeates, to varying degrees, all internal processes and the broader socio-economic environment.
It is important to note that the pronounced differentiation among economic sectors in generating gross value added highlights the relevance of indicators that capture the balanced distribution of growth across key structural components. In this regard, measures of inclusive growth are as significant as GDP growth rates.
Such measures have become indispensable for all countries striving for sustainable development under conditions of uncertainty. Moreover, it is worth underscoring that dynamic growth rates, when combined with structural transformation of the national economy, play a crucial role in mitigating the effects of conjunctural factors. As a result, the importance of qualitative indicators of growth and development, digitalization, and inclusivity continues to rise.
Azerbaijan possesses all the necessary preconditions for genuine transformation: the principles of tolerance, social responsibility, patriotism, democracy, and the alignment of foreign policy with national interests.

Keywords: Qualitative component, inclusive growth, efficiency, innovation policy, state support, digitalization, artificial intelligence, structure.
JEL Codes: O38, 31, O33, O47

Introduction

Structural changes in the economy arise from an objectively established system of institutions, existing socio-economic proportions, implemented economic policies, and defined priority tasks. Such changes do not occur spontaneously; rather, they shape not only the qualitative content of the economic system but also determine the relevance of the instruments employed in economic policy, taking into account the patterns and dynamics of structural transformation. Positive shifts in employment structures and average income levels are achieved only through the creation of new sectors and areas of activity.
Azerbaijan possesses all the necessary prerequisites for genuine transformation: the principles of tolerance, social responsibility, patriotism, democracy, and the alignment of foreign policy with national interests. Building on this foundation, Azerbaijan’s socio-economic development model rests on five interrelated directions:
• a model of strong and effective governance with indirect market regulation (the role of the state);
• an investment inflow model as a driver of economic development (the investment process);
• a transition toward balanced foreign trade and turnover (export development);
• the priority development of industry and agriculture as the basis for stable growth;
• and an effective social policy as the cornerstone of the economic model (social policy).
Therefore, it is essential to establish the foundations for intensive and innovative economic growth and development. To achieve this, the following considerations are advisable:
• An innovation-based economic model designed to address progressive inequality, fostering growth through development by transitioning to a new qualitative stage that emphasizes the potential of innovation, investment, and the tourism industry (the “3 I” approach).
• Consistency in reform implementation, leveraging the advantages of continuity and gradual progress (the “3 P” approach), alongside the establishment of strategic orientations through enhanced coordination, integration, and cooperation (the “3 C” approach). Equally important is achieving consensus among the three key forces - the state, science, and business.
• A diversified growth model, combining the development of non-energy sectors with energy industries to strengthen diversification, resilience, and the qualitative dimension of socio-ecological and economic development.
• The role of the state, with an emphasis on its strengthened function in structural transformation, regulation, and coordination of priority directions.
• Innovative development, through the creation of conditions for genuine innovation-driven growth, enhancement of structural quality, and improvement of competitiveness.
• The emergence of a “permissive economy”, in which contractual relations depend on the political environment. This stage may be characterized as one of quiet economic expansion.

Main Part
Innovation policy is widely recognized as an integral component of the state’s socio-ecological and economic strategy. Its primary aim is the advancement of scientific, technical, and technological spheres. In Azerbaijan, the Government pursues a comprehensive set of measures to achieve these objectives — introducing new products, services, and technologies into the socio-ecological and economic domains to enhance efficiency, competitiveness, inclusiveness, and overall growth. These measures encompass financial support, the development and refinement of the legal framework, the stimulation of scientific research and development, the expansion of innovation infrastructure, the resolution of human resource challenges, and the coordination of innovation activities. Collectively, these initiatives underpin the implementation of the priority directions of innovative development.
In this context, the Government of Azerbaijan continues to advance economic reforms, promote transparency, combat monopolism, attract investment, and improve the overall investment climate. Reflecting on these efforts, President Ilham Aliyev stated in an interview with local television channels on January 7, 2025: “These indicators are not merely the result of the past year. As a result of many years of economic reforms, transparency, the fight against monopolism, investment attraction, and the improvement of the investment climate, we are witnessing positive changes in the attitude of leading international rating agencies toward Azerbaijan.” (Report, 07.01.2025)
For comparison, consider the case of Venezuela – a country with oil reserves exceeding those of Saudi Arabia. Once prosperous, it has since lost nearly everything. The reasons are evident: greed, corruption, and ineffective governance eroded the nation’s wealth. Enormous revenues from oil exports financed the construction of skyscrapers, yet the darker reality was Venezuela’s complete dependence on oil. When global oil prices declined, the country was unprepared. Rather than saving revenues for the future, they were recklessly spent. As a result, social programs and corruption became entrenched in everyday life. A subsequent president nationalized industries, seized private enterprises, and wielded oil as a political instrument. Oil revenues temporarily financed hospitals, food, and housing, reducing poverty in the short term, but the system remained reliant on a single resource. To cover deficits, money was printed, inflation soared, citizens grew poorer, and officials grew wealthier. Billions disappeared from state funds. In 1950, Venezuela ranked fourth globally in per capita income; today, it is among the poorest nations. Natural wealth alone is meaningless if governed by greed – short-sighted policies inevitably lead to decline. By contrast, Azerbaijan possesses all the necessary conditions for genuine transformation: the principles of tolerance, social responsibility, patriotism, democracy, and the alignment of foreign policy with national interests.
Building on these principles, Azerbaijan’s socio-economic development model rests upon five interrelated pillars:
• Strong and effective governance with indirect market regulation (the role of the state);
• An investment inflow model as a driver of economic development (investment process);
• A transition toward balanced foreign trade and turnover (export development);
• Priority development of industry and agriculture as the foundation for stable growth;
• An effective social policy as the cornerstone of the economic model (social policy).
Together, these elements establish the foundations for sustainability, competitiveness, efficiency, and productivity, thereby strengthening the process of intensive and innovative economic growth. Current government policies also underscore the growing importance of inclusive growth, digitalization, and the application of artificial intelligence (AI) in national development.
The main achievements of Azerbaijan’s innovation policy and state support include:
• According to the Global Innovation Index, Azerbaijan ranked 95th in 2024, while securing 15th place in the category of business and innovation environment. The country demonstrates strong results in science–business cooperation, particularly in cluster development and university–industry collaboration.
• The introduction of a “proactive system of social benefits assignment”, incorporating digital components that enable citizens to receive benefits without submitting separate applications.
• Large-scale expansion of digital communication infrastructure and the adoption of new legal frameworks and initiatives, including the Law on Innovation Activity.
• Within the framework of the 2022–2026 national strategy, the establishment of the “Absheron Valley” innovation cluster, designed to create a concentrated “territory of innovation” encompassing education, startups, and infrastructure. This initiative aims to transform the economy from resource-based to technology-driven. By 2026, the cluster is expected to host around 300 startups with a combined value of USD 13 million. Currently, the project is in its early planning and implementation stages, and its long-term success will depend on how many startups successfully enter the market and generate tangible economic returns.
• In 2024, under the auspices of the Innovation and Digital Development Agency (IDDA), the Innovation and Digital Development Center and the Azerbaijan Innovation Center (AIC) were launched. These institutions provide incubation and acceleration programs for startups, offer office space, facilitate connections with investors, and extend benefits to technopark residents. Collectively, such centers contribute to building a sustainable innovation ecosystem — uniting startups, researchers, investors, and business angels.
• One illustrative example is the Azerbaijani startup “Wasco Lab,” which has developed a smart waste management system utilizing IoT devices and digital technologies within the Smart City framework. This system enables up to 50% savings in logistics costs and reduces CO₂ emissions from waste collection vehicles by up to 45%. Its adoption beyond Azerbaijan demonstrates the effective synergy of state support (grants), technological innovation, and international market application. The key challenge, however, remains: how many of these projects will advance to significant stages of development and achieve sustainable success.
• Equally important is the establishment of specialized agencies and working groups tasked with monitoring and coordinating innovation activities, such as the Innovation and Digital Development Agency (IDDA) and the Center for Analysis of Economic Reforms and Communications (CAERC). State support also extends to grants, competitions, and coaching programs for startups and innovative projects.
• Furthermore, Azerbaijan prioritizes the technologies of the Fourth Industrial Revolution (Industry 4.0) and is currently developing a National Artificial Intelligence Strategy for 2025–2028.
• Collectively, these efforts are reflected in the country’s key economic performance indicators (see table).

In Azerbaijan, for instance, the rate of economic growth declined to 1.12% in 2023, compared to 5.62% in 2021, before rising again to 4.6% in 2024. For comparison, economic growth in 2024 reached 9.4% in Georgia, 4.8% in Kazakhstan, and 6.5% in Uzbekistan.
This reflects the outcomes of sustainable long-term development, where growth is characterized not only by quantitative expansion but also by qualitative transformations – including the establishment of an efficient institutional system, innovation-driven progress, technological advancement, and the strengthening of key sectors such as agriculture and services.
Across countries, GDP growth has persisted despite prevailing uncertainty in global economic development. The Inclusive Growth Index remains high in Estonia (60.3) and Lithuania (60.6), while average values are observed in Belarus (50.1), Georgia (41.4), and Azerbaijan (40.2) – reflecting the outcomes of implemented policies.
Meanwhile, payments for transactions with other countries exceeded receipts, resulting in current account deficits in Estonia, Kazakhstan, Georgia, Uzbekistan, Ukraine, and Belarus. In contrast, Azerbaijan, Russia, and Lithuania demonstrated stronger performance in this area.
The Advanced Technology Readiness Index shows higher values in Estonia (0.8), Russia (0.8), and Lithuania (0.7). Conversely, low levels of research and development (R&D) expenditures are observed in Azerbaijan (0.2), Georgia (0.2), and Belarus (0.3), which negatively affect their overall index performance.
These indicators underscore the necessity of enhancing innovation capacity within Azerbaijan’s economic development. Therefore, to substantiate the relevance and effective implementation of the innovation process – and to strengthen the impact of state support – it is advisable to analyze selected indicators of economic growth and development in greater detail.

Conclusion

A higher GDP does not necessarily equate to a high standard of living—HDI makes it possible to account for education and healthcare. The qualitative dimension of economic growth and development is crucial, as it creates real conditions for sustainability and effectiveness. Several issues remain unresolved:
• Although innovation resources (inputs) are improving, actual innovation results (outputs) remain low. In other words, innovation outcomes lag behind inputs, as reflected in the Global Innovation Index.
• Access to financing (venture capital, private investment in R&D) must be strengthened. Current weaknesses include legislative and institutional gaps, as well as dependence on oil and gas, which hinders transformation into an innovation-driven technological economy.
As a result, innovation policy and government support in Azerbaijan have produced certain outcomes – improvements in the business environment, growth of digital infrastructure, and the creation of institutions and support mechanisms. However, the country is still transitioning from a resource-based economy to an innovation-driven one, and key tasks remain: commercialization of innovations, expansion of technological solutions, and attracting capital.
For example: Kazakhstan ranks 81st in the Global Innovation Index, Georgia 56th, and Uzbekistan 79th. Kazakhstan’s strengths include market size, infrastructure, and utility models. Weaknesses include average innovation outputs, dependence on the raw-materials sector, and a developing startup ecosystem. Georgia’s strengths lie in its relatively high rank among upper-middle-income countries, strong institutional improvements, and market sophistication. Weaknesses: outputs still lag – knowledge and technology results remain lower than inputs. Uzbekistan’s strengths include consistent improvement in rankings and progress in human capital and markets. Weaknesses include converting inputs into outputs and ensuring sustainable financing of research and technological results.
Thus:
• Georgia demonstrates the strongest innovation activity (56th place) and the fastest improvement in institutions and business conditions.
• Uzbekistan and Kazakhstan show positive growth dynamics.
• Azerbaijan, starting from a lower base, has strong input positions (institutions, entrepreneurial environment) but weak output results.
A common challenge across these countries is that input resources (infrastructure, institutions, education) improve faster than output results (technology, patents, commercialization). For instance, Azerbaijan ranks 76th in inputs but 112th in outputs; Georgia ranks 48th in inputs but 71st in outputs. This indicates that while investments and policies exist, expansion, development, penetration, and commercialization remain limited.

Explanations for this situation may include:
• The size and structure of the economy – Azerbaijan and Kazakhstan’s reliance on the resource sector hinders rapid transformation toward technological and innovative models.
• Institutional reforms – Georgia’s success in simplifying conditions has supported institutional development.
• Access to export markets and global innovation networks – countries with shorter innovation-transformation paths are still catching up.
• Financing, venture capital, startup support, and commercialization – these remain weak points.
• The persistent gap between inputs and outputs – investments and policies alone are insufficient. Results must translate into tangible products, patents, and companies.
Based on the above, it is important to:
• Adopt best practices from peers to improve institutions and business conditions (e.g., Georgia’s example).
• Strengthen linkages between science, research, and business to accelerate commercialization.
• Expand venture financing, stimulate startups, and build a robust ecosystem.
• Prioritize technological exports and global integration of innovations.
• Monitor outputs – not only infrastructure creation, but also concrete results (patents, technological products, firm growth).

Countries with a more equitable distribution of income tend to experience more stable and inclusive growth. Low levels of inequality are observed in Azerbaijan, Belarus, Kazakhstan, Ukraine, and Finland.
3. Return on Investment (ROI) in Education. The ROI in education reflects the extent to which investments in education “pay off” through higher earnings or improved employment opportunities.
• In Eastern European and Caucasus countries, the average ROI is 6–8% in terms of additional annual income.
• In Azerbaijan, the private rate of return on general secondary education is 6%. For higher education, the rate is higher – 9% for men and 11% for women (World Bank data). In 2024, Azerbaijan allocated 4.55 billion manats (3.5% of GDP) to education, with public funding accounting for 95% and the private sector for 5%. The return rates in Azerbaijan remain below the global average of 8–10% - about 6% annually compared to 7% in Georgia (affected by education quality and labor market conditions), 16% in Turkey, and the global benchmark. Public funding alone does not guarantee high quality or efficient allocation and coordination.
Given these considerations, it is advisable to strengthen the processes of intensive innovation-driven growth, digitalization, and the application of artificial intelligence (AI). At the same time, it is essential to highlight both the advantages and disadvantages of digitalization and AI implementation.

Advantages Observed in Azerbaijan
1. Public Services and Efficiency: Digital government projects (e-government, myGov) accelerate data exchange, reduce bureaucracy, and minimize reliance on paper-based documentation. Public services have become more accessible and efficient, reducing time spent in government offices and expanding opportunities for online interaction.
2. Human Capital Development and Education:
- Launch of educational programs and courses in AI, machine learning, data analytics, and related fields.
- Introduction of new specializations and professional training, fostering a workforce capable of thriving in a digital economy.
3. Economic Growth and Innovation:
- Strengthening the competitiveness of the economy through innovation.
- Development of IT start-ups and support for entrepreneurship in digital sectors.
4. Transparency, Standards, and Regulation:
-Adoption of the National Artificial Intelligence Strategy (2025–2028), which establishes ethical standards, data protection measures, and regulatory frameworks.
-Implementation of projects aimed at eliminating data “pollution” and inconsistencies, thereby improving data quality.
5. Social and Environmental Benefits:
-Reduction in paper usage, contributing to environmental protection and sustainable development.
-Enhanced accessibility of services, particularly in rural and remote areas, through online technologies.
At the same time, it is important to note the existing challenges and risks in Azerbaijan:
1. Shortage of qualified personnel and specialists:
Experts in AI, data engineering, and digital technologies are needed. Insufficient training can lead to errors and inefficiencies.
2. Infrastructure limitations:
Some regions may face weak internet connectivity, insufficient hardware capacity, and limited access to modern computing resources.
3. High costs and investment requirements:
The initial expenses for AI implementation—including equipment, software solutions, and employee training—are significant.
4. Security, privacy, and ethical risks:
Challenges related to personal data processing, data protection, and potential misuse. Compliance with ethical standards and algorithmic transparency is crucial.
5. Social effects:
Potential job displacement if automation replaces certain types of work. Inequality may increase—individuals lacking digital skills risk falling behind.
6. Resistance to change and the digital divide:
Older generations and individuals with low digital literacy may face difficulties. Disparities may persist between urban and rural areas and among different social groups.

There are also advantages at the global level:
1. Increased productivity and automation:
AI and digital technologies enable the automation of routine tasks, freeing up time for more creative and complex work.
2. Improved data-driven decision-making:
The ability to analyze large volumes of data, identify patterns, and generate forecasts supports improvements in business, finance, healthcare, environmental management, and other fields.
3. New markets, products, and services:
General-purpose AI, cloud solutions, remote services, and personalized offerings all create new opportunities for economic expansion and innovation.
4. Enhanced accessibility:
Remote access to education, consulting services, and healthcare expands opportunities for individuals previously constrained by geographic or infrastructural limitations.
5. Support for sustainable development:

Resource optimization, waste reduction, environmental monitoring, and climate-change response efforts are strengthened through digital technologies.

Alongside these advantages, there are also notable challenges and global risks:
• Labour market displacement: Job losses in sectors where AI can replace human labour; the need for reskilling and upskilling. Ethical and legal challenges include responsibility for AI-related errors, algorithmic discrimination, and data bias. Insufficient regulation leads to risks related to privacy and cybersecurity.
• Inequality between and within countries: A widening gap between those with access to technologies, finance, and education and those without such access. This may further intensify global and social inequality.
• Errors, misinterpretations, and overestimation of capabilities: Algorithms are not flawless and may produce false or inaccurate results. The “black box” nature of AI makes it difficult to explain how decisions are made. Overestimation of technological potential often results in investments that fail to generate returns.
• Threats to privacy and increased surveillance: Large-scale data collection increases the risk of data leaks and the misuse of personal information.
• Dependence on major companies and platforms: Large technology corporations may control critical infrastructure (cloud services, AI models), creating dependency and concentration of power.
• In Azerbaijan, structural transformation and the creation of a foundation for productivity growth are advisable. For example, structural change and labour productivity in Norway and Germany demonstrate strong performance in manufacturing and high-tech services.
China and Malaysia are actively expanding their production capacities but face challenges in innovation and technological sophistication.
Innovation and technological development: Singapore stands out with a high Economic Complexity Index, reflecting a well-developed innovation infrastructure. China is advancing in R&D, yet its economic complexity remains lower than that of advanced economies. Social indicators: Norway and Germany exhibit high HDI values, indicating strong performance in living standards, education, and healthcare. India and China display lower HDI values due to disparities in access to quality education and healthcare. Environmental sustainability: Norway actively invests in renewable energy and sustainable agriculture. China faces environmental challenges associated with rapid industrial growth. Institutional development: Norway and Germany have high scores on the Corruption Perceptions Index, reflecting transparency and institutional effectiveness. China and India demonstrate lower GPI values, highlighting the need for institutional reform.
The significance of utilizing artificial intelligence (AI) is steadily increasing. For instance, OpenAI and independent researchers have published a large-scale study on user interactions with ChatGPT. The findings indicate that approximately 700 million users send around 18 billion messages per week. The majority of requests relate to seeking advice, generating texts, and retrieving information, rather than performing work-related tasks (26.06.2025, Figure 9). A global digitalization process is underway, encompassing not only money and passports but also nature itself. The objective is to convert natural objects into assets with identifiers, owners, markets, and monetary valuation, thus limiting direct access to them (e.g., approaching a river) once such entities acquire “legal personhood.” Under the guise of sustainable development, platforms are being created where natural resources are transformed into tokens. Forests are valued in tons of oxygen, rivers in liters of clean water, and land in potential carbon neutrality. Everything becomes subject to sale, following the logic that what can be quantified can be commercialized. In essence, nature is being monetized. Land is being prepared for sale as a form of digital real estate, supported by cadastre systems, satellite imagery, and smart contracts. As a result, water becomes a commodity, air becomes a paid service, the shade of a tree becomes a rental zone, and the human becomes a customer of the Earth—so long as payment is made.
Every crisis and every structural shift leads to wealth redistribution from one group to another. The 1929 crisis transformed old capital into dynasties. The 2008 financial crisis contributed to the emergence of billionaires in the technological sphere. The 2020 pandemic accelerated the rise of cryptocurrency, artificial intelligence (AI), and online commerce. AI and autonomous systems are replacing entire industries. Cryptocurrencies and digital money are reshaping the global financial architecture. Energy conflicts and inflation are restructuring global markets. Governments are heavily indebted and continue increasing money supply. Consequently, all global trends are converging simultaneously. Wealth does not disappear; it merely transfers from one owner to another. Savers lose ground to asset holders. Wage workers lose ground to entrepreneurs. AI displaces not only workers but also companies. Autonomous AI agents are capable of programming, trading, negotiating, and designing. AI could add up to 15 trillion USD to global GDP, and those who utilize AI increase their productivity tenfold. Those who possess AI tools consistently maintain an advantage. A student with a laptop and an AI agent can now perform the work of 50 employees.
An energy revolution is also unfolding. The current competition is not between oil and “green” energy; it is a combination of both. Lithium has become the new oil (battery production for electric vehicles), uranium facilitates nuclear power generation, and solar and wind energy represent decentralized sources.
Real assets in the world include global debt surpassing 300 trillion USD (money printing and rising inflation). Real estate, raw materials, and energy remain the primary means of protection and drivers of economic growth.
The psychology of wealth shows that most individuals seek stability, perceiving chaos as a threat, whereas elites view it as a “discount season.” Stability does not generate wealth; it is created during periods of chaos.

The qualitative indicators of economic growth include the following:

• The assessment of economic growth encompasses not only GDP expansion but also an analysis of structural changes, efficiency, sustainability, performance outcomes, and the socio-environmental dimensions of development.
• A non-diversified economy is vulnerable to the risks of unsustainable development. Therefore, structural challenges must form the basis of economic policy to stimulate intensive innovative economic growth and development.
• Growth that lacks qualitative content is not meaningful if it does not contribute to the establishment of conditions for intensive innovation-driven economic expansion.
• Domestic growth factors are currently becoming more active in the direction of inclusivity (index value of 40.2 in 2024; in Russia – 29.0).
• Digitalization provides advantages but also carries the risk of a “double trap” – a lower share of value added and negative environmental consequences. Therefore, further measures are required to promote innovation, increase labor productivity, and improve the institutional environment.
• Azerbaijan possesses all the conditions necessary for implementing real economic transformation: the idea of tolerance, the idea of a social state, the idea of patriotism, the idea of democracy, and the idea of aligning foreign policy with national interests. Based on this, the socio-economic development model of Azerbaijan rests on five interrelated pillars: a “model of strong and effective governance” with indirect market regulation (the role of the state); an “investment-inflow model” as part of the economic development process (the investment process); a shift toward balanced foreign trade and trade turnover (export development); priority development of industry and agriculture as the foundation of stable growth; and an effective social policy as the core of the economic model (social policy).
• The low level of innovation efficiency requires a transition toward a balanced global ecosystem that stimulates creative activity: innovation index – 95th place; business development index – 94th place; market sophistication index – 114th place (low levels of lending and investment); infrastructure – 102nd place (limited access to ICT and logistics); human capital and research – 94th place (importance of expenditure efficiency); institutions – 51st place (improved stability and regulatory quality).
• It is essential to strengthen the role of the state in the structural transformation of the economy to ensure a transition to intensive innovation-driven economic growth and an enhanced qualitative structure of the economy. Therefore, the priorities and the role of the state include: structural transformation (ensuring proportionality between sectors and branches of the economy); investments in the future (implementation of renewable energy projects and the export of “green” energy); technological breakthrough (reducing the techno-technological gap to enable production development and expansion); and human capital (support and initiatives that enable the real implementation of business potential). The Network Readiness Index stands at 75th place (technology – 40.16%; people – 39.31%; governance – 50.45%; impact – 54.38%).
In conclusion, growth for the sake of quality is essential. What matters is not growth for its own sake, but growth aimed at ensuring sustainability and high-quality national development, reducing dependence on natural resources and increasing the complexity of the economic structure. Therefore, it is important to establish the foundations for intensive innovative economic growth and development. To this end, it is advisable to undertake the following:
• An innovation-based economic model under conditions of growing inequality, with a focus on development-oriented growth driven by a transition to a new qualitative state, emphasizing the realization of the potential of innovation, investment, and the tourism industry (the “three I’s”); the use of advantages derived from the sequence, consistency, and gradual nature of ongoing reforms (the “three P’s”); strategic orientation through strengthened processes of coordination, comprehensiveness, and cooperation (the “three C’s”); and the attainment of consensus among the three pillars — the state, science, and business.
• A new growth model, combining the development of non-energy sectors with energy industries to enhance diversification, sustainability, and the qualitative dimensions of the country’s socio-ecological-economic development.
• The role of the state: strengthening the state’s function in structural transformation, regulation, and coordination of priority directions.
• Innovative development: creating conditions for truly intensive innovative growth, improving structural quality, and enhancing competitiveness.
• A situation is emerging in which a “permission-based economy” takes shape, where every contract depends on the prevailing political stance. This marks a period of quiet economic expansion.
As a result, the main distinguishing features of economic growth policy can be summarized as follows:
• The advisability of forecasting global economic development trends in conjunction with the national economy; strategic planning of priority directions of growth and development; utilization of the existing competitive advantages of the national economy; forecasting development trends in line with international tendencies; and planning and coordinating key directions based on potential advantages.
• The advisability of strengthening both indirect and direct state influence on economic processes through structural and innovation policy, coupled with enhanced digitalization and the use of artificial intelligence (AI).
• Implementation of structural economic transformation by concentrating efforts on prospective sectors aligned with the requirements of scientific, technical, and technological progress, while taking environmental considerations into account.
• Carrying out structural changes to strengthen the alignment of the economic structure with modern development requirements; stimulating and scaling up investments aimed at achieving priority goals in the country’s economic development to enhance sustainability, competitiveness, efficiency, and effectiveness.
• Implementing policies to stimulate both demand and supply in order to improve the welfare of the population.
It should also be noted that there are indirect mechanisms that facilitate the implementation of economic growth and development policies. These include the following:
• Implementation of fiscal, tax, and monetary policy measures, and the creation of a favorable institutional environment through institutional reforms.
• Conducting an analysis of the structure of final GDP use (the sum of expenditures on final consumption, gross accumulation, and net exports). The analysis of final consumption allows for a detailed examination of household consumer spending on the one hand, and the share of GDP allocated to defense, administration, healthcare, education, and science on the other.
• Existence of real levers (as legislator, customer, consumer, public sector entity, or political force) of state influence on the formation of growth and development opportunities in the economy, contributing to the provision of intensive innovative economic growth.
• Implementation of effective and result-oriented industrial policies that lay the foundation for the Fifth Industrial Revolution, aiming to strengthen the transition to an innovation-driven economy, accelerate digitalization, and promote the use of artificial intelligence (AI).
• Strengthening the process of structural transformation to enhance economic complexity, efficiency, and effectiveness, particularly given the emergence of a “permission-based economy”, where every contract depends on the prevailing political stance. Sanctions through supply refusal create global dependence, whereby participation in technological chains requires loyalty to specific demands. A period of quiet expansion has begun, with temporary prohibitive tariffs on goods. Therefore, fostering innovation in development is crucial, as innovations emerge not from the top but on the production line. True innovation lies not in creating something new, but in bringing it to perfection, with discipline being the foundation of efficiency and effectiveness.
Therefore, in order to utilize qualitative indicators of economic growth, it is advisable to:
1. Introduce multiple indicators (composite indexes) to assess overall productivity, growth, and economic development, ensuring a comprehensive consideration of human, social, and environmental factors:
• Human Development Index (HDI);
• Inclusive Growth Index (WEF);
• National Strength Index;
• Global Innovation Index;
• OECD Better Life Index.
2. Transition from a quantitative to a qualitative GDP component:
• Assess the GDP structure (increase in the share of innovative and high-tech sectors);
• Account for value added per unit of labor;
• Labor productivity as a key factor in achieving sustainability and efficiency.
3. Scale the assessment of informal/shadow economy development:
• Account for informal/shadow employment and economic activity;
• Use additional data to improve the accuracy of real economic performance and activity assessment.
4. Indicators of sustainability and environmental efficiency contribute to the evaluation of long-term sustainable growth and development while considering environmental challenges:
• “Green GDP”;
• Energy efficiency index;
• Accounting for the share of investments in ecology and “green” jobs.
5. Indicators of social justice promote a focus on inclusiveness and the reduction of social inequality:
• Gini coefficient;
• Social mobility;
• Access to education, healthcare, and infrastructure services.
6. Strengthening innovation and digitalization fosters future-oriented development, productivity growth, and knowledge export:
• Global Competitiveness and Innovation Index (GII);
• Share of R&D expenditures in GDP;
• Share of digital services and skills.
In conclusion, the use of qualitative indicators of economic growth will allow Azerbaijan to:
• Assess development not only by GDP but also by the standard of living, income equality, and sustainability;
• Orient state policy toward the real priorities of the economy and societal needs;
• Increase investor and international institutional confidence in the qualitative component of economic governance and coordination.

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• Yuzbashieva G.Z. The Influence of Digitalization and the “Green” Economy on Enhancing Sustainability in the Country’s Economic Development. International Scientific Conference “School-Seminar named after Academician S.S. Shatalin: Systemic Modeling of Socio-Economic Processes”. Roundtable 1: “Development of National Economies in Modern Conditions”, 7–11.10.2025, Minsk, Republic of Belarus. [https://www.smsep.ru] (https://www.smsep.ru)
• Yuzbashieva G.Z. Qualitative Indicators in Ensuring Sustainable Economy. 03–04 May 2025, Istanbul, Boğaziçi Scientific Research Congress. [www.isarconference.org] http://www.isarconference.org
• https://unctadstat.unctad.org/datacentre/dataviewer/US.FTRI](https://unctadstat.unctad.org/datacentre/dataviewer/US.FTRI
• https://unctadstat.unctad.org/datacentre/dataviewer/US.InclusiveGrowth] https://unctadstat.unctad.org/datacentre/dataviewer/US.InclusiveGrowth)
https://ru.tradingeconomics.com/country-list/manufacturing-pmi] https://ru.tradingeconomics.com/country-list/manufacturing-pmi)
• https://www.wipo.int/web-publications/global-innovation-index-2024/en/index.html] https://www.wipo.int/web-publications/global-innovation-index-2024/en/index.html)
• https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locale=ru&name] https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locale=ru&name)_
• https://www.kommersant.ru/doc/7959936] (https://www.kommersant.ru/doc/7959936)
• https://gtmarket.ru/ratings/human-development-index] https://gtmarket.ru/ratings/human-development-index)
• https://nationpowerindex.com/] (https://nationpowerindex.com/)
• https://statbase.ru/datasets/indexes-and-ratings/gini-index/] https://statbase.ru/datasets/indexes-and-ratings/gini-index/)
• Data from WEF and OECD
• Figure 9, 26.06.2025