Baku, the capital of Azerbaijan, is the complete powerhouse of Azerbaijan's national economy. The natural resources-rich city accounted for 76% of Azerbaijan's total gross domestic product in 2016. The city benefits from oil wealth, with 60% of its USD26 billion GVA being generated by mining and manufacturing activities. However, due to vulnerability of changes in oil prices, this share is falling every year. Baku's necessity to diversify its economy stands as a top priority.
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Azerbaijan's economy is greatly reliant on its capital, Baku, which is responsible for 76% of national GDP as of 2016. Being the major centre of oil-related logistical activities increases Baku's labour productivity, with the GVA produced per employee 12 times higher in the city than in the rest of the country.
As in many oil-dependent cities, Baku's labour productivity advantage does not fully translate into the paid-out wages. In 2016 disposable income per household stood at USD11,200 per year, which was 3.2% less compared with the rest of Azerbaijan.
Baku's average per household spending level (excluding housing and transport) was less than of the rest of Azerbaijan by 7.4% in 2016. The most prominent categories, where the population of Baku spent less than the rest of the country, were household goods and services (49% less spending) and alcoholic beverages and tobacco (-34%).
In 2016 expenditure on housing and transport was 26% greater in Baku compared to the rest of the country. With the disadvantage of 3% in disposable income this makes the city quite unaffordable. While expenditure on housing was 5% greater in Baku, transport expenditure per household experienced the biggest difference, with 54% more expenses in Baku than in the rest of the country.