Caucasus Country Risk Report

Published 22 July 2015 | Quarterly

  • 62 pages
  • Instant access to your report online and PDF format through your account library
  • Includes 3 free updated quarterly reports
$1,195.00
Caucasus Country Risk Report

Core Views

  • Political tensions in the South Caucasus will remain high over the coming years as increased Russian intervention in Georgia's breakaway territories fuels concerns that Russia will attempt to annex Abkhazia and South Ossetia. Meanwhile, Azerbaijani-Armenian relations will remain strained over the frozen conflict surrounding Nagorno-Karabakh.

  • Armenia's economy will continue to struggle during 2015-2016 primarily due to its trade and remittance flow links with ailing Russia. Beyond this we continue to see little means of diversifying its growth model away from one driven by private consumption underpinned by volatile remittance flows.

  • Georgian real GDP growth will slow over the next two years relative to the 5.5% average growth achieved between 2010 and 2014 due to exposure to Russia's economic crisis, which has been triggered by Western sanctions and magnified by a dramatic fall in global oil prices. We forecast the Russian economy to contract 5.2% in real terms this year.

  • Azerbaijan will continue to tread a fine line between siding with either Russia or the EU. Azerbaijan's economic interests can be better served by increasing trade and energy routes with the EU, while maintaining good relations with Moscow will likely assist in keeping the autocratic regime of President Ilham Aliyev in power.

Major Forecast Changes

  • We have revised down our forecasts for headline real GDP growth to 0.5% and 1.9% for 2015 and 2016, from 2.9% and 3.2% respectively. This sharp downward revision is primarily due to the worsening outlook for Armenia's main trading partner, Russia, which we forecast to experience a 5.2% economic contraction during 2015.

Key Risks To Outlook

  • Given the close links between the Armenian economy and Russia the selloff in the Russian rouble, the collapse in global oil prices and the ongoing Western sanctions on Russia will all serve to constrain Russian real GDP growth. This in turn will see Armenian growth remain subdued as...

BMI Index League Tables
9
Core Views
11
Major Forecast Changes
11
Key Risks To Outlook
11
Chapter 1
13
Domestic Politics
13
Political Landscape Becoming Increasingly Authoritarian
13
table: Political Overview
13
Long-Term Political Outlook
15
Mitigation Of Regional Tensions Key To Stability
15
Chapter 1
19
Economic Activity
19
Weak Remittances To Stifle Household Spending
19
table: GDP By Expenditure
19
Chapter 1
23
The Armenian Economy To 2024
23
Convergence To Stall
23
table: Long-Term Macroeconomic Forecasts
23
Chapter 2
25
Domestic Politics
25
Democratic Reforms Not Forthcoming
25
table: Political Overview
25
Long-Term Political Outlook
27
Everything Hinges On Nagorno-Karabakh
27
Chapter 2
31
Economic Activity
31
Oil Slide To Usher In Period Of Slow Growth
31
table: GDP By Expenditure
31
Chapter 2
35
The Azeri Economy To 2024
35
Trend Growth Bolstered During 2018-2023
35
table: Long-Term Macroeconomic Forecasts
35
Chapter 3
37
Domestic Politics
37
Integration Treaties Signal Impending Annexation
37
table: Political Overview
37
Long-Term Political Outlook
39
Pro-Western Path To Continue
39
Chapter 3
43
Economic Activity
43
Growth Sluggish As Russia Suffers Recession
43
table: GDP By Expenditure
43
Table: Selected Infrastructure Projects
44
Chapter 3
47
The Georgian Economy To 2024
47
Foreign Investment To Support Growth
47
table: Long-Term Macroeconomic Forecasts
47
Chapter 3
49
Operational Risk
49
table: Emerging Europe - Legal Risk
50
Legal Environment
50
Costs Of Labour
53
table: Emerging Europe - Labour Cost Risk
54
TABLE: Average Annua l Wage By Sector (GEL)
55
table: Regulations Governing Flexibilit y Of Workforce
56
table: GEORGIA - Operationa l Risk
57
Chapter 5: BMI Global Assumptions
59
Global Outlook
59
Softening Growth Picture
59
Table: Global Assumptions
59
Table: Developed States, Real GDP GrowtH, %
60
Table: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
60
Tab le: Emerging Markets , Real GDP Growt h, %
61

The Caucasus Country Risk Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Azerbaijan, Georgia, Armenia. It is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.

An influential new analysis of Azerbaijan, Georgia, Armenia's economic, political and financial prospects through end-2019, just published by award-winning forecasters, BMI Research.

Key Uses

  • Forecast the pace and stability of Azerbaijan, Georgia, Armenia's economic and industry growth through end-2019.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the operating environment that pose hidden barriers and costs to corporate profitability.
  • Contextualise Azerbaijan, Georgia, Armenia's country risks against regional peers using BMI's country comparative Risk Index system.
  • Evaluate external threats to doing business in Azerbaijan, Georgia, Armenia, including currency volatility, the commodity price boom and protectionist policies.

The Caucasus Country Risk Report by BMI Research includes two major sections: Economic Outlook and Political Outlook.

Economic Outlook:

How will the Azerbaijan, Georgia, Armenia' economic policy-making and performance impact on corporate profitability over 2015-2019?

BMI provides our fully independent 5-year forecasts for Azerbaijan, Georgia, Armenia through end-2019 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The Caucasus Country Risk Report features BMI's forecasts with supporting analysis for 2015 through to end-2019, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:

Data:

  • Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
  • BMI's comprehensive Risk Index system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

  • Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
  • Balance of Payments - trade and investment, current and capital account.
  • Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
  • Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
  • Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
  • Foreign Direct Investment - approvals, inflows and climate.
  • External Debt - debt profile (short and long-term plus public and private sector obligations).
  • Global Assumptions - forecasts for each year to end-2019 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.

Key Benefits

  • Rely upon BMI's 100% independent forecast scenarios for Azerbaijan, Georgia, Armenia and underlying assumptions - we take no advertising and are privately-owned.
  • Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Azerbaijan, Georgia, Armenia, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
  • Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.

Political Outlook:

What are the political risks to doing business in Azerbaijan, Georgia, Armenia over the next 5-years?

BMI's Azerbaijan, Georgia, Armenia country Risk Index evaluates the short- and medium-term threats to political stability.

Political Outlook Contents

  • SWOT Analysis for the Azerbaijan, Georgia, Armenia Market - Political Strengths, Weaknesses, Opportunities and Threats facing Azerbaijan, Georgia, Armenia.
  • Political Stability and Risk Assessment - BMI's Risk Index assesses explicit short- and long-term risks to political stability; latest positioning and trends for Azerbaijan, Georgia, Armenia's risk are compared with regional and global averages.
  • Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.
  • Long-Term Political Outlook BMI examines the structural risks to the stability of Azerbaijan, Georgia, Armenia’s political system and the dominant public policy issues likely to affect decision-makers, and outlines scenarios for how the state could evolve in the medium to long term.

Key Benefits

  • Benchmark Azerbaijan, Georgia, Armenia's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
  • Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
  • Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.

*Not all Country Reports contain the Key Sector Outlook chapter. Please enquire above for more information.

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