Home / Economy / The South Caucasus Economy in Figures – Europe still on the Horizon

The South Caucasus Economy in Figures – Europe still on the Horizon

According to a forecast by the International Monetary Fund (IMF), Georgia is expected to achieve the current level of economic development level of Eastern and Central European countries within 18 years. According to the IMF report, Georgia’s average economic growth indicator will be 5.8%.

Consequently, it will take 18 years for Georgia’s GDP per capita to exceed 10,965 USD, and Georgia will come to the current level of Bulgaria, Hungary, Poland, Romania, Serbia and Turkey. It is interesting that under the IMF report, Kazakhstan will come up to the European level in 7 years, Turkmenistan in 10 years, Armenia in 23 years and Azerbaijan in 45 years.

GDP of Georgia, Azerbaijan and Armenia in 2018

According to Geostat, the national statistics service of Georgia, the pace of GDP growth in 2018 was at  4.8%. According to January-November indicators, Azerbaijan’s economy grew by 1%. It is noteworthy that in 2011-2018 the economic growth of Azerbaijan was at  7.7%. This indicates that the Azerbaijani economy has increased by only 0.9% a year. Specialists refer to unstable prices for oil and gas. As for Armenia, according to the Statistics Committee of Armenia, GDP growth in 2018 made up 5%. According to specialists, if not for the 2018 political developments (protest rallies, change of power), the figure would be much higher. It turns out that in January-March of 2018, the pace of economic growth in Armenia reached 10%, and, according to specialists, the figure could be even 11%.

Economic Growth Paces of the countries in our region in 2003-2017 (based on IMF report):

  • 2003 : Georgia – 11.2%; Armenia – 14.1%; Azerbaijan – 10.2%
  • 2004: Georgia  – 5.8%; Armenia – 10.5%; Azerbaijan – 9.3%
  •  2005: Georgia – 9.6%; Armenia – 14.1%; Azerbaijan – 28%
  • 2006: Georgia  – 9.4%; Armenia – 13.2%; Azerbaijan – 32
  • 2007: Georgia – 12.6%; Armenia – 13.7%; Azerbaijan – 25.5%
  • 2008: Georgia  –  2.4%; Armenia – 6.9%; Azerbaijan  – 10.6%
  • 2009: Georgia – -3.7%; Armenia –  – 14.2%; Azerbaijan – 9.4%
  • 2010: Georgia –  6.2%; Armenia – 2.2%; Azerbaijan – 4.6%
  • 2011: Georgia – 7.2%; Armenia –  4.7%; Azerbaijan – – 1.6%
  • 2012: Georgia –  6.4%; Armenia –  7.1%; Azerbaijan – 2.1%
  • 2013: Georgia – 3.4%; Armenia –  3.3%; Azerbaijan – 5.9%
  • 2014: Georgia – 4.6%; Armenia – 3.6%; Azerbaijan – 2.7%
  • 2015: Georgia – 2.9%; Armenia – 3.3%; Azerbaijan – 0.6%
  • 2016: Georgia – 2.8%; Armenia – 0.3%; Azerbaijan – -3.1%
  • 2017: Georgia – 5%; Armenia – 7.5%; Azerbaijan  – 0.1%

International ratings

As a result of streamlined tax procedures, in the Ease of Doing Business rating, Azerbaijan ranked 25th, Armenia 41st and Georgia 6th. Azerbaijan has surpassed Armenia in the Best Countries for Doing Business rating by Forbes, where Azerbaijan ranked 70th, Armenia 81st and Georgia 44th. In the Economic Freedom rating by the Heritage Foundation, Georgia ranks 16th among 186 countries, Azerbaijan is 67th and Armenia is 44th.

Shadow Economy

According to an IMF report published on its website in 2018, Georgia is a leading countries worldwide in terms of the ratio of the economy to the shadow economy. According to the report’s authors, Leandro Medina and Friedrich Schneider, the correlation of Georgia’s shadow economy to GDP exceeds 53%. According to the 1991-2015 indicators, the ratio of shadow economy in Turkey represents 31.38%, Russia – 38.42%, Armenia – 42.59% and Azerbaijan – 52.19%.

Social Inequality Indicator or Gini Coefficient in South Caucasus

As is commonly known, the Gini coefficient measures a distribution of incomes among citizens. The higher a Gini coefficient, the larger the  inequality. Regretfully, in this metric Georgia comes back only at the level of  Russia (42.02) in the Post-Soviet space. As for the South Caucasus, we have the following situation: According to the 2016 UN indicators, Georgia’s Gini coefficient is at the 40.0% percentile, Armenia – 31.5%, Azerbaijan 33.7%. It is interesting to note that,  according to World Bank indicators in Georgia the middle class represents around 7% of the population, 32% are poor, 37% are moderately poor and 24% live below poverty level.

According to the statistics specialist Soso Archvadze,the  income of the rich citizens of Georgia exceeds the incomes of the poor citizens by a factor of 17.

Foreign Investments

According to 2018 January-September indicators, in Armenia foreign direct investments (FDI) constituted 178 million USD. Over the past 25 years total FDI inflows do not exceed 10 billion USD.

Specialists assert that this low activity is related to the complicated political situation in Armenia. There is a better situation in Georgia in terms of FDI inflows. According to Geostat, in January-September 2018, FDI inflows made up 998 million USD. Over the past 15 years, FDI inflows to Georgia exceeded 12.45 billion USD. It is clear that foreign investors demonstrate much more interest in Georgia than Armenia. Foreign investors show a higher degree of interest in Azerbaijan, namely in the hydrocarbon resources of the country. According to the government of Azerbaijan, in 2006-2017 years FDI inflows to Azerbaijan exceeded 44 billion USD.

In January-September of 2018, FDI inflows to Azerbaijan exceeded 2.9 billion USD. According to the Central Bank of Azerbaijan, FDI inflows to the country in 2018 declined by 35.5% compared to 2017.

By Zura Khachapuridze