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The Week in the Neighbourhood

01.10.23 12:10

Azerbaijan officially dissolved Nagorno-Karabakh. As of September 30, 100,437 forcibly displaced persons from Nagorno Karabakh arrived in Armenia. The United States will provide Armenia with $11.5 million worth of humanitarian aid for families from Nagorno-Karabakh. The EU said it will boost sum to EUR 5 million. EUR 7 million will be provided by France.

Here is a rundown of the latest political and economic developments around Georgia's neighboring Armenia, Azerbaijan and Türkiye during the last week.


The breakaway region of Nagorno-Karabakh will cease to exist and its remaining ethnic Armenian population will have to accept being ruled as part of Azerbaijan, according to a decree issued Thursday. In a statement, the unrecognized Karabakh Armenian administration said that de facto President Samvel Shakhramanyan had signed an agreement that would “dissolve all state institutions and organizations under their departmental authority by January 1, 2024.”

As of 2:00 pm, 100,437 forcibly displaced persons from Nagorno Karabakh arrived in Armenia, 21,062 vehicles crossed the Hakari bridge, the number of registered persons is 82,827. As of 2:00 pm, 34,607 people used the shelters offered by the state, the government said.

Azerbaijan's State Border Service (DSX) said on September 27 that it has detained billionaire Ruben Vardanian, a former Russian citizen of Armenian descent, who served as prime minister in the de facto government of the breakaway region of Nagorno-Karabakh for less than four months before he was dismissed from the post in February. According to DSX, Vardanian was detained while leaving along with thousands of ethnic Armenians fleeing Nagorno-Karabakh, which is now under the full control of Azerbaijan, for Armenia via the Lachin Corridor. Vardanian was then transferred to Baku, the statement said.

The EU said it will boost its humanitarian funding with €5 million in response to the increasing needs resulting from the Nagorno Karabakh crisis. The €5 million humanitarian funding includes €500 000 of emergency support announced last week and €4.5 million new funding, which will assist people displaced from Nagorno Karabakh to Armenia. This aid will be delivered by various EU humanitarian partners operating in Armenia with the aim to reach around 25 000 people. The priority is to provide cash assistance, shelter, food security and livelihoods assistance.

The United States will provide Armenia with $11.5 million worth of humanitarian aid for families from Nagorno-Karabakh, U.S. Agency for International Development (USAID) Administrator Samantha Power said.

The French government in cooperation with partner organizations will provide 7 million euros to meet the social needs of the refugees from Nagorno-Karabakh, French Ambassador to Armenia Olivier Decottignies announced.

Armenia's draft state budget for 2024 includes a separate item on forcibly displaced persons from Nagorno-Karabakh. Armenian Finance Minister Vahe Hovhannisyan told a Cabinet session that 10 billion drams (USD 25,675,610) are tentatively envisaged.

The European Bank for Reconstruction and Development (EBRD) said in its latest report "Regional Economic Prospects (September 2023) it expects Armenia's economy to grow by 6.5% in 2023 and slow down to 4.5% in 2024. In its previous update in May, the EBRD forecasted that Armenia's economy would grow by 5% in 2023, remaining at that level in 2024. The review notes that Armenia's economy continued to perform exceptionally well in 2023, but the first signs of slowdown are already visible.

Armenia's economic activity in the first 8 months of 2023 was up 10.4% compared to the same time span of 2022, the National Statistical Committee (NSC) reported. It said the growth in 2023 August alone was up 6.2% against the previous month of July. Virtually all sectors of the economy reported growth, except for industrial output and electricity generation.

Armenia’s foreign trade turnover in the first 8 months of 2023 amounted to about $12 billion, having surged by 53% from the same time span in 2022, the National Statistical Committee (NSC) reported. It said in August 2023 alone compared to August last year, the foreign trade was up 10%, and compared to July this year – up 8.7%. Armenian exports increased by 51.8% to about $4.5 billion, In August 2023 a 6.1% growth was recorded compared to August last year.  Armenian imports totaled over $7.5 billion, registering a 53.8% increase compared to January-August 2022. In August of the current year, imports grew by 12.4% from August 2022.

Consumer prices in Armenia in the first eight months of 2023 increased by 3.1% year-on-year, the National Statistical Committee (NSC) said. A 0.2% drop in prices was recorded in August 2023 compared to August last year, while compared to July 2023 the prices in August 2023 were up 0.1%.

Electricity generation in Armenia in the first 8 months of 2023 dropped by 2.6% compared to the same period of 2022 to over 5.7 billion kWh.


The European Bank for Reconstruction and Development (EBRD) predicts a 1.5% growth (1 percentage point less than the forecast in May) in Azerbaijan's real gross domestic product (GDP) in 2023, and 2.5% in 2024 (-0.2 percentage points).

In 2024, the revenues of the consolidated budget of Azerbaijan are expected to be 38,578.1 million ( down 10.4% from the approved forecast for 2023) manats ($22.7 billion), and the expenses are expected to be 41,956.8 million (+1.7%) manats ($24.7 billion), according to the Ministry of Finance. The deficit of the consolidated budget should amount to 3,378.7 million manats ($2 billion).

In 2024, defense and security expenses in Azerbaijan are expected to be 6,421 million (+6%) manats ($3.8 billion).

In 2024, the cost of the state debt and liabilities servicing in Azerbaijan is expected to be 1,972.6 million manats ($1,158.97 million).

Azerbaijan will finance the projected deficit of 2.59 billion manats ($1.52 billion) of the state budget mainly through borrowing in 2024, the Ministry of Finance said. According to the information, borrowing is planned for 1.85 billion manats ($1.08 billion), which will make up 71.6% of the deficit. In addition, it is planned to finance the deficit in the amount of 448 million manats ($263.19 million) at the expense of the balance of the single treasury account, 105 million manats ($61.7 million) at the expense of revenues from privatization, and 182.6 million manats ($107.28 million) at the expense of the funds of the Budget Fund for Road projects (within the closing of the deficit of that Fund).

Azerbaijan's banking sector made a net profit of 724.2 million manats ($426 million) in January-August of this year (+22.9%).

As of September 1, 2023, overdue loans in Azerbaijan amounted to 534.3 million manats ($315.3 million), up 8% from a month earlier. The amount of problem loans in the country decreased by 10% compared to the beginning of the year, and by 19% in comparison to a year earlier.

In the first half of this year, the number of international cargo transportations by road transport belonging to Azerbaijan was 122,049, up 67% from the same period last year.

Plans agreed last year by Azerbaijan and the European Union for Baku to double the volume of gas it sends to Europe to 20 billion cubic metres a year are on hold as European gas buyers have yet to confirm they'll take the gas.

Since the beginning of this year, 7.4 billion cubic meters of natural gas have been transported from Azerbaijan to Türkiye, Energy Minister Parviz Shahbazov said. According to him, this figure is expected to be 10.2 billion cubic meters by the end of this year.


Türkiye’s banking sector posted a net profit of 350.58 billion Turkish liras ($13.2 billion) in the January-August period. The sector’s net profit was up 39% on a yearly basis in the first eight-month period, according to data by Banking Regulation and Supervision Agency (BRSA). Total assets of the sector rose 60.2% year-on-year to 20.33 trillion Turkish liras ($700.67 billion) as of the end of August, the report showed. Loans, the biggest sub-category of assets, were 10.44 trillion Turkish liras ($393.56 billion), up 56.75% compared with the same period of the last year.

The net international reserves of Türkiye’s central bank are envisaged to have grown by more than $6 billion (TL 163 billion) last week, bankers said last Tuesday, maintaining an upward trend since the government started embracing more conventional policymaking after the May elections. The increase would bring the Central Bank of the Republic of Türkiye’s (CBRT) net international reserves to $24 billion.

The value of the Turkish lira against the US dollar on September 29 once again reached a historical low. Since the beginning of the month, the dollar has risen in price against the lira by almost 3%, and since the beginning of the quarter by almost 5.5%, according to trading data. This morning, the dollar/lira exchange rate rose 0.39% to 27.4699 from the previous closing level of 27.3628 lira.

US-based credit ratings agency Standard & Poor's (S&P) on Friday affirmed Türkiye's credit rating at B and revised its outlook from "negative" to "stable." The agency said the stable outlook reflects "balanced risks" on Türkiye's creditworthiness after a return to orthodox monetary policy settings as the Central Bank raises interest rates.

Türkiye has agreed to send natural gas to Moldova via pipeline starting Oct. 1, the Turkish Petroleum Pipeline Corporation (BOTAS) announced. The agreement between BOTAS and Moldova's East Gas Energy Trading will cover the export of 2 million cubic meters of natural gas daily to Moldova.

Türkiye’s biggest industrial enterprises have seen their production sales leap by almost 120% in 2022, a closely watched annual study said. The top 500 Turkish industrial companies’ sales jumped from TL 2.48 trillion ($90.95 billion) in 2021 to TL 4.485 trillion last year, a 119% year-over-year increase, showed the ISO 500 list, prepared by the Istanbul Chamber of Industry (ISO).

Istanbul, Türkiye’s biggest city and a tourist hot spot, welcomed more than 11.5 million foreigners in the first eight months of the year, official data showed. The number of tourists arriving in the metropolis, often described as the bridge between Europe and Asia, jumped 13.2% year-over-year from January through August to 11.52 million, the Culture and Tourism Ministry said. This year’s momentum has been driven by an influx from Europe, particularly Germany and the United Kingdom, besides arrivals from Russia, mainly due to flight restrictions imposed by Western nations over Moscow’s invasion of Ukraine.