The International Monetary Fund (IMF) said that Turkish economy is now expected to expand 4% in 2023, up from the previous projections of 3%. The Fund forecasts 2.5%-growth in the gross domestic product in Azerbaijan this year, 0.5 percentage points less than the Fund's April forecast. IMF upgraded its forecasts for Armenian economy. GDP growth in Armenia is now expected to be 7% in 2023, up from previous 5.5%.
Here is a rundown of the latest economic, business and political developments around Georgia's neighboring Turkey, Azerbaijan and Armenia during the last week.
Turkey
The International Monetary Fund (IMF) said that Turkish economy is now expected to expand 4% in 2023 and 3% in 2024, up from the previous projections of 3% and 2.8%, respectively.
The unemployment rate in Türkiye edged down 0.2 percentage points month-over-month to 9.2% in August. The nation's jobless rate fell by 56,000 to 3.22 million in August on a monthly basis. The unemployment rate was 7.5% for men and 12.6% for women. A seasonally adjusted measure of labor under-utilization rose 0.4 percentage points to 23.0%. The labor under-utilization measure had largely slid since early 2021 but has edged higher in recent months. The labor force participation rate in August fell to 53.3% from 53.4% a month earlier.
Türkiye's retail sales volume increased by 17.2% year-on-year in August. In August, food, drinks and tobacco sales rose by 15.3% while non-food sales increased by 24.2% and fuel sales dropped by 1%, on a yearly basis. Retail turnover with current prices soared by 87.5% in August 2023 versus August 2022. On a monthly basis, retail sales volume saw a decline of 4.7%. Food, drinks and tobacco sales increased by 0.1%, non-food sales decreased by 5.6%, automotive fuel sales decreased by 9.0%.
Russia has prepared a road map for the proposed gas hub and submitted it to Türkiye, Deputy Prime Minister Alexander Novak said, also stressing Azerbaijan’s intention to join the initiative. The Kremlin last October floated the idea of creating a major gas-trading hub in Türkiye as Moscow worked to reroute its energy exports after European countries sharply cut their imports from Russia in response to its actions in Ukraine. The plan followed unexplained explosions that damaged Nord Stream gas pipelines linking Russia with Germany under the Baltic Sea. The project has garnered significant attention from both Türkiye and Russia, with other nations expressing interest as well, according to Novak.
Türkiye's turnover index was up by 69% in August, on a yearly basis, the country's statistical authority said, as all sub-indexes saw increases. Industry increased by 55.5%, construction increased by 106.3%, trade increased by 75.8% and services increased by 65.4% on annual basis in August 2023. On a monthly basis, the turnover index was up by 2.3%, TurkStat said, adding that industry increased by 2.0%, construction 2.6%, trade 1.9%, and 4.6%.
A total of 219 investment rounds amounting to $154 million were made in the first nine months of 2023, spanning seed, early, and late-stage ventures, according to data released by Industry Monitor Startups Watch. Although the count and deal sizes came in far above the pre-pandemic, they were still far below the figures during the outbreak. The overall investment amount declined 47% compared to the previous quarter, marking the lowest figure among the last 13 quarters. A detailed analysis of startup watches data positions Türkiye as the fourth most active player in the European and Middle East and North Africa (MENA) region for seed-stage investments, trailing behind the United Kingdom, Germany and France. In terms of the size of the deals, standout sectors included software as a service (SaaS), artificial intelligence (AI), gaming, retail technology and energy. As for the number of deals, startups engaged in gaming, AI, SaaS, energy and financial technology, or fintech attracted significant attention from investors.
In a bid to curb soaring rents, the Turkish government is set to introduce stringent regulations on short-term rentals, similar to vacation rental booking company Airbnb. The bill submitted by the ruling Justice and Development Party (AK Party) to the Parliament on Tuesday seeks to mandate landlords to secure permits from the Culture and Tourism Ministry for such rentals. In addition, homeowners will be obligated to pay taxes, display a designated sign on their property, and fulfill a fee requirement. The proposal comes as residents have struggled to find affordable homes due to soaring prices, attributed to stubbornly high consumer inflation. Annual inflation rose to more than 61% in September, according to official data, and is expected to rise further toward the end of the year.
Türkiye's industrial production rose by 3.1% in August on a yearly basis. All subsectors posted annual increases in the month. Among subsectors, the mining and quarrying sector index increased by 5.1%; the manufacturing industry sector index increased by 1.8%; and the electricity, gas, steam and air conditioning production and distribution sector index rose by 4.9% in August, compared to the same month last year. The unadjusted industrial production index also increased by 2.91% on an annual basis. Month-over-month, Türkiye’s industrial production fell by 0.8% on a seasonal and calendar-adjusted basis in August. Meanwhile, the annual increase, which was announced as 7.4% for July, was revised to 7.6%.
Armenia
The International Monetary Fund (IMF) forecasts Armenia's GDP growth at 7% in 2023, according to the October World Economic Outlook. In April, the IMF expected the republic's GDP to grow by 5.5% this year. Next year, according to the fund's forecasts, the Armenian economy will grow by 5%, and in 2028 - by 4.5% (both figures correspond to the April forecast). The state budget of Armenia for 2023 envisages GDP growth of 7%. The country's economy grew by 14.2% in 2022.
Russia may move as far as to slap sanctions on Armenia (for drifting away from Moscow’s zone of influence), warns Vahram Mirakyan, Chairman of the Mantashyants Entrepreneurs Association. "Taking into account the fact that Russian politics prefers to use brute force instead of 'soft power,' which is not applied or it is done poorly, everything can be expected," Mirakyan said. The consequences of possible sanctions, he said, depend on Armenia's reaction. "If Armenian authorities manage to reintegrate the economy, the consequences will not be serious, if they fail – they will be severe. They also depend on what kind of sanctions Russia may apply- whether they would affect energy resources, for example, they may turn off natural gas supplies or raise its price," he said. Mirakyan noted that Armenia should have alternatives in terms of security and economy, diversify everything so that Russia would not throw back the Armenian economy to the level of '93 by imposing sanctions. Earlier it was reported that about 60 trucks with Armenian cognac of different producers had been stuck at the Georgian-Russian checkpoint Upper Lars due to tightened customs control enforced by Russian customs authorities.
Armenian leader Nikol Pashinyan had skipped a summit that Russian President Vladimir Putin was attending, host country Kyrgyzstan said. Pashinyan's snubbing the meeting of a Moscow-led regional grouping was a further blow to ties between Yerevan and Moscow, which have soured in recent weeks. Pashinyan has criticized Moscow's role in the Karabakh crisis, with Russia unwilling to intervene when Azerbaijan launched a lightning operation to regain control of the breakaway Nagorno-Karabakh region, which had a majority Armenian population.
Russian Foreign Minister Sergey Lavrov accused NATO countries' of attempting to use Armenia to promote their interests in the South Caucasus. "As for stoking anti-Russian sentiments (in Armenia), this is being done artificially to a decisive degree. We know about the number of non-governmental organizations that have been established in Armenia in recent years, and there were many of them before," Lavrov said. According to him, these organizations are not created to promote friendly relations between Armenia and the Russian Federation. "It is just the opposite. They are aimed at creating a ground for anti-Russian sentiments and preparing for the promotion of interests, first of all, of the US and European Union and NATO countries in that region through Armenia. We see these attempts, they are achieving some results," Lavrov claimed.
The UN and its partners launched an emergency response plan to help 136,000 refugees, appealing for $97 million to respond to urgent needs of those who fled the Karabakh region and their hosts in Armenia. “We call upon the international community to urgently support refugees and their hosts,” said Filippo Grandi, UN High Commissioner for Refugees. “International support is crucial to sustain this welcome and to enable us to respond to immediate needs and to also build upon the resilience of this population.” Following the escalation of hostilities at the end of September, more than 100,000 refugees arrived in Armenia in less than a week.
Armenia's service sector surged by 14.8% in the first eight months of 2023 as opposed to the same months of 2022 to about two trillion drams (in current prices), the National Statistical Committee (NSC) reported. In August 2023 alone the sector grew by 13.8% compared to August 2022 to over 268.7 billion drams (USD 678,347,391).
Armenia’s construction sector grew by 17.3% in the first eight months of 2023 from the first eight months of 2022 to about 283.6 billion drams (USD 716 million). in August alone, the sector surged by 17.5% as opposed to August 2022.
Armenia's domestic trade upped 23.1% in the first eight months of 2023 from the same time span of 2022 to about 3 trillion 246 billion drams (USD 8,2 billion).
Azerbaijan
The International Monetary Fund (IMF) forecasts a 2.5%-growth in the gross domestic product (GDP) in Azerbaijan this year, 0.5 percentage points less than the Fund's April forecast. The IMF expects Azerbaijan's economy to grow by 2.5% next year and in 2028, which is 0.1 percentage points less than the previous forecast. The government of Azerbaijan predicts GDP growth at 2.7% in 2023 and 4.1% in 2024.
In the 9 months of 2023, the electricity generation in Azerbaijan increased by 0.1 percent amounting to 20,279,700 kWh.
Azerbaijan's public debt amounted to 17.2 billion manat ($10.1 billion), or 14.4 percent of the projected gross domestic product for 2023, as of October 1, the Azerbaijani Finance Ministry said.
Azerbaijan's state budget revenues from the oil and gas sector amounted to 8,946.1 million manats ($5.3 billion), which is 30.5% less than the forecast and 17.2% less than for the same period last year. According to the Ministry of Finance that the share of the oil and gas sector in budget revenues for the reporting period amounted to 40.5%. The reduction is due to a decline of 2,992 million manats ($1.8 billion) in receipts from the State Oil Fund.
In January-September of this year, revenues to the state budget of Azerbaijan in the non-oil and gas sector amounted to 13,130.8 million manats ($7.7 billion), which is 6% more than the forecast and 13.2% more than for the same period last year. The Ministry of Finance said that the share of the non-oil and gas sector in budget revenues for the reporting period amounted to 59.5%.
Azerbaijan will allocate 3,825 million manats ($2.2 billion) or 10.4% from state budget expenditures for the reconstruction and restoration of the liberated territories, the Ministry of Finance said adding that this is 20.3% less than the approved forecast for 2023. Expenditures on Karabakh and Eastern Zangazur will amount to 49.1% of the expenditures of the economic activity.
Current expenses made 14,118.4 million (over $8.3 billion) or 60.8%, capital expenditures made 8,382.4 million manats (nearly $5 billion) or 36.1% and expenses associated with servicing public debt and obligations made 713.7 million manats (nearly $420 million) or 3.1% of Azerbaijan's state budget expenditures in January-September. According to the data of the Ministry of Finance, this is 11.4% more, 26.8% more and 40.2% less, respectively, than the same period last year.
Taking into account anti-inflation measures, the Ministry of Economy of Azerbaijan predicts that the average annual inflation will be at a single-digit level - 9.5% by the end of 2023. In January-September of this year, the average annual inflation was 10.9%. In this period, the annual inflation was 5.1%.
In January-September 2023, the retail trade network sold 40.9 billion manats ($24.03 billion) worth of goods to consumers, including 23 billion manats ($13.53 billion) worth of food, beverage, and tobacco wares, and 17.9 billion manats ($10.51 billion) worth of non-foods, the State Statistical Committee said. Compared to January-September 2022, the retail trade rose by 3.3%, food, beverage, and tobacco products went up by 2% and non-food products surged by 4.8%.
In January-September 2023, the nominal personal income in Azerbaijan amounted to 58,018.3 million manats ($34.13 billion), 13.8% more than in same period of 2022, the State Statistical Committee said. Last year, the nominal per capita income in the country increased by 13.1% compared to the previous year and reached 5,717 manats ($3,362).
Azerbaijan's GDP made 90.812 billion manats ($53.35 billion) in January-September of this year, up 0.8% year-on-year. Over the past year, value added in the oil and gas sector of the economy fell 1.5%, while in the non-oil-gas sector, it increased by 3%.
The budget revenues of Azerbaijan in January-September 2023 made up 22.077 billion manats ($12.99 billion) and the budget expenditures – 23,214.5 million manats ($13.66 billion), respectively, down 1.4% and up 13.4% from the previous year. Consequently, the budget deficit amounted to 1,137.5 million manats ($0.67 billion).
Investment in fixed capital in Azerbaijan amounted to 12,728.9 million manats ($7.49 billion) in January-September 2023, marking a 21.3% growth in comparison to a year earlier. Over the past year, investments in the oil-and-gas sector increased by 18.1%, and in the non-oil-and-gas sector surged by 23.2%.
