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The region's three economies face distinct challenges as Azerbaijan follows up on its military victory, Armenia licks its wounds and Georgia copes with political turmoil.
As Armenia and Azerbaijan recover in the aftermath of last November's conflict and Georgia struggles politically after tarnished elections, the South Caucasus states faces big challenge-even as they attempt to wrest.e Covid-19 under control. Having faced significant hits to GDP, investment and employment in 2020, growth will be the priority this year, along with easing conditions for individuals and businesses most impacted by the pandemic.
Armenia, the poorest and least populous of the three countries, is grappling with the consequences of losing its 44-day war with Azerbaijan. Much of the area surrounding the region of Nagorno-Karabakh that it had held since the last conflict between the two in 1994 was lost, along with the town of Shusha, just a 25-minute drive from the disputed territory's capital of Stepankert. Many Armenians have been calling for the resignation of Prime Minister Nikol Pashinyan, who arguably provoked the conflict but was then obliged to sign humiliating peace terms.
Last month, Pashinyan, who came to power in May 2018 promising a major economic overhaul, fired the army's chief of staff, whom he had accused of plotting a coup. Hoping to keep his ambitious reform plans alive, he also proposed early elections and a referendum on a new constitution. But tensions remain high.
Armenia's GDP contracted by 8% last year; tourism and commodity sales, which comprise a high proportion of exports, were hit badly by the pandemic. Remittance payments from Armenians working in Russia and e sewhere are also significantly down. And all this is before factoring in the impact on the national psyche of losing a disastrous war.
"Armenia suffered worse over 2020 than we expected,âeuro says Dimitar Bogov, regional lead economist for Eastern Europe and the Caucasus at the European Bank for Reconstruction and Development. "We had anticipated more resilience, but the contraction turned out the worst in the Caucasus.âeuro The decline has continued into 2021, with GDP falling 7.5% in January. Bogov hopes for a pick-up of...