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The present article "Azerbaijan's Current and Potential Comparative Advantage", which has been prepared as a contribution to the National Employment Strategy, provides an analysis of the sectors and industries in which Azerbaijan is either currently competitive or there is a potential to become competitive in the future. This study proves the existence of the competitive, non-oil sectors in Azerbaijan and there are justifiable reasons to suppose that new and competitive industries can develop in the future. Along with the analyses of the current competitive sectors in Azerbaijan, this report recommends to undertake detailed and comprehensive analysis of those sectors which are proved to be currently competitive and to identify the key obstacles hindering their development. These further investigations should also provide a basis for linking comparative advantage with labor markets to create the conditions for competitive industries that generate more employment in the sectors outside oil and gas.

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The strategic purpose of the economic policy of Azerbaijan is to ensure sustainable growth. The external factors including oil prices in the world market and investments have a significant influence on economic activity in Azerbaijan. The relationship between oil prices and gross domestic product has been scrutinized and the sensitivity of macroeconomic indicators to oil prices has been investigated. The dependence of investment activity, including foreign investments on oil prices has been determined. In the research, econometric models have been constructed in the purpose of studying the impact of oil prices on key macroeconomic indicators from the qualitative and quantitative point of view. At the same time, a comparative analysis of oil reserves of Azerbaijan with other oil countries has been conducted. According to the results, the government should determine new and sustainable growth pillars based on risks emerged from oil price, improve economic policy and accelerate the transition to innovative high-tech models of economic development.