Business Monitor International


Caucasus Business Forecast Report

Published 26 August 2014

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

Core Views

  • Despite a reduction in political tensions across the South Caucasus in H214 we still highlight potential conflict between Armenia and Azerbaijan over the disputed Nagorno-Karabakh region, as well as the possibility of a deterioration in Russo-Georgian relations as a significant threat to social and economic stability in the region.

  • The Armenian economy is likely to receive a short-term boost from its accession to the Eurasian Economic Union (EEU) in January 2015. Membership of the EEU will facilitate trade and investment flows from Armenia's primary export destination and source of FDI, Russia. Nevertheless, in the long term we believe EEU membership will hold back Armenia's economic growth potential as the economy remains reliant on Russian demand.

  • Georgian real GDP growth will remain relatively robust over the coming quarters as the finalising of an Association Agreement and Deep and Comprehensive Free Trade Agreement opens up the EU market for exporters. There is the risk that less inhibited trade with the EU sees the increase in imports outweigh the rise in exports, but in the long term we hold to our view that deeper integration with the EU will benefit the Georgian economy as European FDI flows increase.

  • While Georgia has signed a number of agreements with the EU, fostering closer links between Tbilisi and Brussels, and Armenia is on course to join the EEU, tying the country into Russia's sphere of influence, we believe 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 up our forecasts for real GDP growth in Georgia to 4.8% in 2015 and 4.6% in 2016, from 4.2% and 4.0% previously. The deals signed with the EU will assist...

Table of Contents

Core Views
11
Major Forecast Changes
11
Key Risks To Outlook
11
Chapter 1
13
Domestic Politics
13
Still On The Russian Path Following PM Switch
13
Table: Armenia - Political Overview
13
Long-Term Political Outlook
15
Mitigation Of Regional Tensions Key To Stability
15
Chapter 1
19
Economic Activity
19
Few Drivers Of Growth Ahead
19
Table: Armenia - Economic Activity
19
Chapter 1
21
The Armenian Economy To 2023
21
Convergence To Continue
21
Table: Armenia - Long-Term Macroeconomic Forecasts
21
Chapter 2
23
Domestic Politics
23
Renewed Human Rights Concerns Threaten European Ambitions
23
Table: Azerbaijan - Political Overview
23
Long-Term Political Outlook
24
Everything Hinges On Nagorno-Karabakh
24
Chapter 2
29
Economic Activity
29
Hydrocarbons Continue To Bolster Growth Outlook
29
Table: Azerbaijan - Economic Activity
29
Chapter 2
33
The Azeri Economy To 2023
33
Trend Growth Bolstered
33
Table: Azerbaijan - Long-Term Macroeconomic Forecasts
33
Chapter 2
35
Business Environment Outlook
35
Institutions
35
Tab le: BMI Lega l Framework Rating
35
Tab le: Labour Force Qua lit y
36
Table: Emerging Europe - Annual FDI Inflows
37
Table: Trade And Investment Ratings
38
Infrastructure
38
Market Orientation
39
Operational Risk
41
Chapter 3
43
Domestic Politics
43
EU Integration Generates Security Threats
43
Table: Georgia - Political Overview
43
Long-Term Political Outlook
44
Pro-Western Path To Continue
44
Chapter 3
47
Economic Activity
47
Economy Vulnerable To Russian Retaliation
47
Table: Georgia - Economic Activity
47
Chapter 3
49
The Georgian Economy To 2023
49
Foreign Investment Will Support Growth
49
Table: Georgia - Long-Term Macroeconomic Forecasts
49
Chapter 4: BMI Global Assumptions
51
Global Outlook
51
Growth Increasingly Polarised
51
Table: Global Assumptions
51
Tab le: Developed States , Rea l GDP Growt H, %
52
Tab le: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
52
Tab le: Emerging Markets , Rea l GDP Growth , %
53

The Caucasus Business Forecast Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Armenia, Azerbaijan and Georgia and 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 the Caucasus' economic, political and financial prospects through end-2017, just published by award-winning forecasters, Business Monitor International (BMI).

Key Uses

  • Forecast the pace and stability of the Caucasus' economic and industry growth through end-2017.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the business environment that pose hidden barriers and costs to corporate profitability.
  • Contextualise Caucasus' country risks against regional peers using BMI's country comparative Risk Ratings system.
  • Evaluate external threats to doing business in the Caucasus, including currency volatility, the commodity price boom and protectionist policies.

The Caucasus Business Forecast Report by Business Monitor International (BMI) includes three major sections: Economic Outlook, Political Outlook and Business Environment.

Economic Outlook:

How will the Caucasian economic policy-making and performance impact on corporate profitability over 2013-2017?

BMI provides our fully independent 5-year forecasts for the Caucasus through end-2017 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 Business Forecast Report features BMI's forecasts with supporting analysis for 2013 through to end-2017, 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 Ratings 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 exposure).
  • Global Assumptions - forecasts for each year to end-2017 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 the Caucasus and underlying assumptions - we take no advertising and are privately-owned.
  • Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on the Caucasus, 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 the Caucasus over the next 5-years?

BMI's Caucasus country Risk Ratings evaluate the short- and medium-term threats to political stability.

Political Outlook Contents

  • SWOT Analysis for the Caucasian Market - Political Strengths, Weaknesses, Opportunities and Threats facing the Caucasus.
  • Political Stability and Risk Assessment - BMI's Risk Ratings assess explicit short- and long-term risks to political stability; latest ratings, rankings and trends for the Caucasus' 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.

Key Benefits

  • Benchmark Caucasus' 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.

Business Environment

Business Environment Risk Ratings with SWOT Analysis - Business environment Risk Ratings for the Caucasus, benchmarked against ratings for regional neighbours.

Country Competitiveness - Competitiveness of Caucasus' business operating environment in supporting corporate growth and profitability, compared with regional neighbours.

Business Environment Contents

  • Domestic Environment - Transparency, cronyism and corruption; labour market flexibility; corporate tax burden; interest rate levels; sophistication of banking sector and stock market; levels of business confidence; infrastructure and IT.
  • Foreign Direct Investment - Analysis of foreign investment regime; foreign ownership laws; attractiveness of business environment to foreign investors.
  • Foreign Trade - Analysis of trading environment, government trade policy, liberalisation measures, tariffs and membership of trade areas.

Key Benefits

  • Assess your company's evolving exposure to country specific operational and business risks, using BMI's in-depth analysis of the legal and regulatory business environment.
  • Understand your market's comparative strengths and weaknesses in the key areas of commercial infrastructure and business institutions, using BMI's proprietary global Business Environment Risk Ratings.

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Testimonials

The sections that I find most interesting and useful are the macroeconomic data and forecasts for the country, top export destinations and economic activity. The indicators/analysis of these areas helps us orient our thinking, our assumptions and, consequently, our decisions in the commercial area.

Country Manager, DHL Express