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 an escalation in violence along the border of the disputed Nagorno-Karabakh region in July/August 2014, it is not part of our core scenario to see the outbreak of a widespread military conflict between Armenia and Azerbaijan. While the leadership of each side espoused aggressive nationalist rhetoric in order to ensure domestic support, the key powers in the region (Armenia-supporting Russia and Azerbaijan-supporting Turkey) are unlikely to favour an outbreak of conflict on their southern and eastern flanks respectively.

  • The Armenian real GDP growth will slow in 2015 on the back of declining export demand from Russia, as well as stagnating remittance growth, a key driver of private consumption. With Armenia set to join the Eurasian Economic Union on January 1 2015 we believe the economy will remain heavily reliant on Russian support over the coming years.

Major Forecast Changes

  • On the back of robust growth in H114 and positive leading indicators we have revised up our real GDP growth forecasts for Georgia in 2014 and 2015, from 3.4% and 4.1% to 4.4% and 4.2% respectively. We expect growth to slow in 2015 from 2014 as growth in exports to Russia slows on the back of Moscow discontinuing a free trade agreement in retribution for Georgia deepening its ties with the EU.

Key Risks To Outlook

  • Given the relatively weak links between the two countries' economies we do not believe Georgia's shift towards the EU will be hindered by punitive Russian sanctions. However, a continuation of the poor relations between Moscow and the West could lead to the Russian government becoming more aggressive in its dealings with states it views as within its sphere of influence. A Russian military incursion beyond the breakaway regions of South Ossetia and Abkhazia could result not only in a widespread military conflict in Georgia, but also likely some form of retaliatory action by the West.

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