Caucasus: Regional Economic Outlook Bleak - IMF Report
Economic conditions in Armenia, Azerbaijan and Georgia are set to go from bad to worse before they start to slowly improve, according to an International Monetary Fund report.
The economies of all three countries in the South Caucasus have virtually stagnated, as the crisis-fueled price crunch on oil and commodities exports impact sources of government revenue, the IMF said in its findings released May 11. Oil exporter Azerbaijan has been particularly hard hit by lower energy prices, but at least has the ability to cushion the economic blow by tapping into cash reserves accumulated during the boom years, the IMF noted. Both Armenia and Georgia have seen their export revenues - largely dependent on copper exports and ferro-alloy exports, respectively - weakened.
The IMF projects real Gross Domestic Product growth in Azerbaijan to slow from 11.6 percent in 2008 to 2.5 percent this year. Georgia's already modest growth index - 2 percent in 2008 - is expected to shrink to 1 percent. According to the IMF prognosis, Armenia will be the hardest-hit with its 6.3-percent growth rate plummeting to a negative rate of -0.5 percent.
The IMF predicts recovery to begin in 2009, but urges careful macroeconomic stewardship. In the meantime, it prescribes free-floating exchange rates, tighter bank regulations and targeted government aid to the poor to help mitigate the pressures.