THE IMPACT OF GLOBAL ECONOMIC UNCERTAINTY ON OIL PRICES, INVESTMENT FLOWS, AND THE ECONOMY OF AZERBAIJAN

Abstract

This article provides a comprehensive analysis of the impact of global economic uncertainty on oil prices, investment flows, and the economy of Azerbaijan. The main objective of the study is to identify the transmission mechanisms through which global risks affect Azerbaijan’s economy. Both theoretical and empirical approaches are applied, examining the interrelationship between the oil market, investment dynamics, and the development of the non-oil sector. The findings indicate that global economic uncertainty primarily influences Azerbaijan’s economy through oil prices and their volatility. Fluctuations in oil prices weaken the investment environment, particularly leading to a decline in capital investments in the energy sector. This process, in turn, has an indirect negative effect on the growth rate of the non-oil sector. The analysis shows that the potential growth rate of non-oil GDP is approximately within the range of 4–5%, and the sustainability of this growth largely depends on investment flows. At the same time, it is determined that economic growth does not always generate direct inflationary pressure; the level of capacity utilization plays a crucial role in this context. The results of the study demonstrate that exchange rate stability and coordination of fiscal policy play a significant role in mitigating the negative effects of global risks. In particular, the expansion of the non-oil sector and improvement of the investment climate are key conditions for ensuring economic resilience. The scientific novelty of the article lies in presenting the relationship between global uncertainty, oil prices, investment flows, and non-oil growth within a unified analytical framework. The practical significance of the research is that the findings can be useful for improving economic diversification, fiscal sustainability, and investment policy.