Azerbaijan - the economic barometer of the region

In the post-pandemic period, the economies of the South Caucasus countries developed according to their own characteristics. While the economies of Georgia and Armenia showed dynamics, Azerbaijan has been the leader in terms of GDP volume over the past decades, writes the newspaper "Caspian".

Georgia and Armenia in recent years have been considered as important routes for bypassing sanctions and establishing alternative trade channels between Moscow and the outside world. This, by the way, was reflected not only in the GDP of these countries but also in the total volumes of foreign trade of the South Caucasus states. At the same time, Azerbaijan's economy, which was less affected by the Russian-Ukrainian conflict, is characterized by a transformation that is reflected not in quantitative but in qualitative changes, particularly in the structure of GDP.

Neighborhood as a development factor

Speaking about the reasons for the unprecedented growth of economic indicators in Georgia and Armenia, many agree that both countries have extracted maximum benefit from their border position with Russia. During the Russian-Ukrainian escalation, both Tbilisi and Yerevan earned substantially from the transit of goods going to and from Russia, from re-exports, as well as from the relocation of Russian businesses and citizens.

In addition, in 2022-2023, money transfers from Russia to Armenia and Georgia reached record levels, also due to population migration. Despite the subsequent decrease in the volume of money transfers, as well as the volume of trade with Russia, the factor of proximity to this country and the presence of close economic and transport-logistical ties remains an important element of economic development.

It should be added that the tourism sector of these countries is significantly dependent on the influx of Russian tourists. Their share in the total tourist flow is so substantial that it noticeably affects the service sector, which plays one of the leading roles in the structure of the national economies of both Georgia and Armenia.

At the same time, Georgia and Armenia in recent years have been trying to significantly diversify their foreign economic activities. In both cases, leading positions in foreign trade, besides Russia, are occupied by China and EU countries. For Georgia, neighboring Azerbaijan and Turkey are also priority partners. Armenia, although it considers Georgia as one of its important economic partners and tries to develop active trade with Iran, still does not take effective steps to unblock economic relations with Azerbaijan and Turkey, remaining aside from regional economic cooperation.

Azerbaijan - the leader in trade

Azerbaijan actively develops its economic relations with all regional partners, excluding Armenia, and also builds close relationships with non-regional players. First of all - with the European Union, China, and Middle Eastern countries. This allows diversifying trade and economic relations and improving the development of export potential.

One way or another, the active foreign economic dynamics of all three countries could not but affect the absolute indicators of foreign trade of the South Caucasus countries. It is enough to note that since 2021, the total trade turnover of all three states in the region has almost doubled - from $52 billion to $101.03 billion.

Speaking about the peculiarities of economic development of the South Caucasus countries, one can also highlight a certain specialization that characterizes the national economies of Azerbaijan, Armenia, and Georgia.

For Azerbaijan, the industrial sector, mainly fuel and energy, acts as the driver of economic development. Moreover, in the new conditions, we are talking about diversification of production through energy generation from renewable sources. In addition, the basis of Azerbaijan's economic strategy for the foreseeable future is the development of the non-oil sector, including through the creation of platforms for the production of high value-added products. For this purpose, the country