Oil price and urgency towards economic diversification through effective reforms and policies in Caspian Basin

Abstract

This paper highlights that oil price fluctuations cast negative impact on oil exporting economies of Caspian Basin namely as; Azerbaijan, Kazakhstan and Russia. These resource abundant economies faced revenue contraction and dwindling budget expenditures due to oil price change. To justify underlined reasons, current study examined export and economic diversification analysis for all three economies. It can be concluded that these countries unable to achieve economic diversification due to over dependence on oil revenues. Most of the export oriented sectors consists of minerals, oil and gas by neglecting the more sustainable growth of non-resource tradable sectors. As a result, these countries have huge share in exports mainly as natural resources. In terms of economic diversification which is based on sectoral value added also indicates that these countries are showing some signs of diversity but still there is need to have structural reforms and policy instruments to diversify their revenue stream.