This economic report records the economic activities of Azerbaijan for the year 2013. Economic growth picked up in the first half of 2013 on the back of higher public investment and moderation in the decline in oil production. The continued decline in oil production, even though at a slower pace than in 2012, lowered the fiscal and current account surplus. Fiscal performance was however better than what was budgeted due to higher oil prices and pick-up in growth. A fall in oil exports lowered the current account surplus and net capital outflows from Azerbaijan continued for the sixth year in a row. Diversification remains high on the policy agenda but the country has a long way to go. Limited progress has been made on most of the components of human capital and institutions, and a lot more needs to be done. In the absence of alternate sources of growth, the hydrocarbon sector will continue to determine the economic performance of Azerbaijan over the medium-term. The decline in oil production is expected to be partially offset by an increase in natural gas production. With a fall in oil related fiscal revenues, public expenditures are expected to be scaled back thereby reducing non-oil growth. Hence, economic expansion is estimated at 4.5 percent per year over the medium-term.