BAKU, Azerbaijan, October 17. GDP growth in the South Caucasus is expected at 5.6 percent, Trend reports via the Regional Economic Update for Europe and Central Asia from the World Bank (WB).
According to the report, the forecast has been revised upwards by 2.2 percent from June outlook, while the subregion showed the fastest growth among Europe and Central Asia (ECA) region.
“The improvement reflects better-than-expected GDP outturns, with activity supported by high energy prices and fiscal support in Azerbaijan, as well as robust domestic demand in all [South Caucasus] economies… The easing of COVID-19 restrictions, as well as a surge in money transfers from Russia, have fueled the pick-up in domestic demand and subsequently inflation. Inflation has also increased alongside high prices for imports, food, and fuel,” the report said.
However, the WB anticipates the economic growth in the South Caucasus in 2023 to decrease sharply to 3.3 percent - “well below the rate of potential growth for most of these economies”.
“The deceleration reflects weakening momentum after a strong rebound in 2022, the slowdown in the European Union, and a sharper-than-expected contraction of 2023 output in Russia - one of the South Caucasus’s closest economic partners - as delayed sanctions related to the EU oil embargo take full effect and energy supplies are further disrupted,” the report said.
At the same time, as the WB noted, “a possible acceleration in natural gas output by Azerbaijan, following a deal brokered with the EU to boost energy exports to the bloc” remains an upside risk for the South Caucasus economies' outlook.
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