Türkiye boosts defense budget for 2024 by 150%. Turkish President Recep Tayyip Erdogan said his government seeks to reduce inflation to 4.7 percent by the end of 2028. Armenia's government is developing a new trade strategy to diversify the country’s exports. According to Armenia’s Prime Minister Nikol Pashinyan, his country is ready to sign a peace treaty with Azerbaijan by the end of this year. Azerbaijan said it plans to export 24 billion cubic meters of natural gas in 2023.
Here is a rundown of the latest economic, business and political developments around Georgia's neighboring Turkey, Armenia and Azerbaijan during the last week.
Türkiye
Türkiye will allocate TL 1.13 trillion (around $40 billion) to its defense budget in 2024, marking a 150% increase from this year’s budget. This year, Türkiye allotted around $16 billion for defense and security. Along with raising its budget, Türkiye seeks to boost exports, employment and localization in the defense and aerospace industry through the policies and measures to be implemented in the 2024-2028 period. “Defense industry exports will be increased from $6 billion to $11 billion, and the defense industry’s self-sufficiency rate will be increased from 80% to 85%,” Vice President Cevdet Yılmaz said.
Turkish President Recep Tayyip Erdogan said his government seeks to reduce inflation to 4.7 percent by the end of 2028. "We aim to permanently reduce inflation to single digits and reduce it to 4.7 percent by the end of 2028," Erdogan said in a statement on social media platform X, formerly known as Twitter. Türkiye's annual inflation rate climbed to 61.53 percent in September as the central bank aggressively raised interest rates from 8.5 percent to 30 percent since June.
The inflation rate in Türkiye forecast for the end of this year has been adjusted upward to 68.01%, according to the data released by the Central Bank of the country. “In the last report [for September], the consumer price index [CPI] at the end of the year was calculated at 67.22%. According to current statistics [for October], the CPI at the end of the year will be 68.01%,” the Central Bank said. At the same time, CPI calculations for the future 12 and 24 months from the current moment indicate that inflation will be 45.28% and 25.82%, respectively. On September 21, the Turkish Central Bank once again raised the discount rate from 25% to 30%. This decision was made as part of tightening monetary policy with the goal of achieving disinflation as quickly as possible.
A total of 900,074 houses were sold in Türkiye during the January-September period, the country’s statistical institute said. House sales decreased by 14.9% in the nine-month period on a yearly basis. Over the same period, foreigners bought 28,064 houses in the country, down by 43.5% on a yearly basis. In September alone, 102,656 units were sold in the country, down by 9.5% year-on-year. House sales to foreigners decreased by 42% to 2,930 units in September compared to the same month of the previous year.
Türkiye’s residential property price index (RPPI) measuring the quality-adjusted price changes of homes increased by 90.3% on an annual basis in August, and 5.5% month-over-month. According to data from the Central Bank of the Republic of Türkiye (CBRT), although the monthly increase in housing prices gained momentum in August compared to the month earlier, the prices saw the slowest increase on an annual basis since January last year. While the RPPI surged by 5.5% month-over-month, the real increase in this period was 21.9%, the data showed. Looking at the change in index value in the three largest provinces, an increase of 5.4%, 5.2% and 5.5% was observed in Istanbul, Ankara and Izmir during August, respectively.
Türkiye’s public budget swung to a deficit in September, after a brief period of surplus in July and August. The central government budget registered a shortfall of TL 129.2 billion ($4.63 billion), an increase of 64.3% year-over-year, the Treasury and Finance Ministry said. That compared to some TL 78.6 billion in September 2022.
The Turkish private sector's outstanding debt received from abroad was at $155.3 billion in August, down by $2.5 billion versus the end of 2022. Long-term loans totaled $146.5 billion while short-term loans amounted to $8.7 billion, the country's Central Bank said. Some 59% of the total long-term loans were in US dollars, 36.1% in euros, 2.1% in Turkish liras and 2.8% in other currencies, while the majority of the total short-term loans – 38.6% – was in US dollars, followed by 36.1% in euros, 18.6% in Turkish liras and 6.7% in other currencies. Of the total long-term loans, 35.1% were liabilities of the financial institutions, while 64.9% consisted of the liabilities of non-financial institutions.
Türkiye’s automotive production increased by 12% in the January-September period, while automobile production rose by 21% when compared to the same period last year. The country's Automotive Manufacturers Association (OSD) said total automotive production surpassed the 1 million mark and stood at 1,074,155 units in the first nine months, including 687,817 units of automobiles.
Selçuk Bayraktar, the chief technology officer (CTO) and chairperson of the board of the Turkish drone magnate Baykar, announced that the company would make a $10 million donation for critically-needed humanitarian assistance to Gaza. In a message he posted on X, formerly Twitter, Bayraktar harshly criticized Israel’s indiscriminate attacks, as he said the country is committing war crimes by targeting hospitals, schools and places of worship.
Armenia
Armenia's government is developing a new trade strategy to diversify the country’s exports, Deputy Economy Minister Rafael Gevorgyan said. "We are developing a trade strategy, the cornerstone of which will be export diversification. We believe that no type of products should be dependent on one sales market. There should be significant diversification both in the variety of products and sales markets," Gevorgyan said.
Armenia is ready to sign a peace treaty with Azerbaijan by the end of this year, Prime Minister Nikol Pashinyan said, speaking at the European Parliament in Strasbourg. Nikol Pashinyan told European MPS that his main task is to help establish peace in the region. He noted that it would not be easy, given the protracted confrontation with Azerbaijan."Our region needs peace, i.e. a situation where all countries live with open borders, enjoying active economic, political and cultural relations, where issues are resolved through diplomacy and dialog. We do not oppose our vision of peace to the interests of our region, because our country can be peaceful if there is peace in the region," Pashinyan said.
Armenia expects European Union's support in overcoming humanitarian problems of refugees from Nagorno-Karabakh, Prime Minister Nikol Pashinyan said, speaking at a European Parliament session in Strasbourg. "More than 100,000 Armenians have been evicted from Nagorno-Karabakh and I would like to note that about 20,000 more Armenians from Nagorno-Karabakh had fled to Armenia after the 44-day war in 2020. Our urgent task is to focus on meeting the humanitarian needs of these people as soon as possible," Pashinyan said.
A number of countries and international organizations have pledged to provide assistance to Armenia through ICRC for a total amount of 35 million euros to meet the needs of Nagorno-Karabakh refugees, Deputy Prime Minister Tigran Khachatryan said. The deputy prime minister said also that another 35 million euros are promised through other channels, including 15 million euros as budgetary support to the Armenian government. The other 20 million will be provided through the Armenian representative offices of foreign development agencies.
India considers joining 'dry port' project in Armenian Gyumri. Armenian Deputy Minister of Economy Narek Terian and Armenian Trade Attaché in Iran Vardan Kostanyan met with Indian Minister of State for Ports, Shipping and Waterways Shantanu Thakur to discuss the possibility of involving the Indian side in the "dry port" project in Armenia second-largest town of Gyumri. According to the Armenian government, the "dry port" is to become a multifunctional and multimodal hub to serve regional and international companies that need to consolidate customs processes. It will allow the Shirak region to become an industrial zone. The "dry port" will be adjacent to both Shirak International Airport and the railway station and North-South transportation corridor. It will include the airport as a free economic zone, distribution centers (hubs), small and medium enterprises, light industry facilities, production bases and an international food market.
Azerbaijan
This year, natural gas production in Azerbaijan is predicted to be 48.7 billion cubic meters, and exports 24 billion cubic meters, Energy Minister Parviz Shahbazov said. The minister said that during the energy crisis, Azerbaijan became a reliable strategic partner in ensuring energy security, and a country diversifying Europe's energy supply: "Last year, when energy supply was experiencing turbulence, gas supply to Europe increased by 40% to the highest possible level - 11.4 billion cubic meters from 8.2 billion cubic meters in 2021.” According to Shahbazov, Türkiye has been supplied with 24.3 billion cubic meters of Azerbaijani gas and Europe with 28.7 billion cubic meters of gas through the Trans-Anatolian Pipeline (TANAP) and Trans-Adriatic Pipeline (TAP).
Presently, the demand of more than 10 European countries for Azerbaijani gas is more than 30 billion cubic meters per year, Energy Minister Parviz Shahbazov said. He noted that 28.7 billion cubic meters of Azerbaijani gas were transported to Europe via the Trans Adriatic Pipeline (TAP).
The export of gas volumes declared at customs from Azerbaijan in January-August 2023 amounted to 17.4 billion cubic meters, which is 15.5% higher than the figure for 8 months of 2022, according to the State Customs Committee. Gas supplies during the reporting period accounted for 42.92% of Azerbaijan’s total exports (39.31% in January-August 2022). Revenue from the export of gas amounted to US$10,5 billion (an increase of 1.3%). According to the committee, in January-August 2023, the largest volume of declared gas exports was shared by Turkey (41.4%) and Italy (38.3%).
Azerbaijan’s Azerenegy OJSC exported 3.1 billion kWh of electricity worth $330.44 million in January-September 2023, respectively, up 4.7 times and 9.08 times from the previous year. The electricity exports during the reporting period made up 1.25% of Azerbaijan’s total exports, and 13.57% of non-oil exports.
The average annual inflation in Azerbaijan is expected to be 9.5% in 2023, the Ministry of Finance said. According to the base scenario, this figure will be 5.3% in 2024. “The average annual inflation in Azerbaijan is expected to fall to 4.2% in 2027,” the Finance Ministry said.
The ratio of the state budget deficit to the gross domestic product (GDP) in Azerbaijan is predicted to decrease to 2.2% in 2024, and to 1.9% in 2027, the 2024-2027 Medium-term Budget Framework announced by the Ministry of Finance reads. According to the document, the upper limit of the state budget deficit in 2024 is predicted to amount to 2,590 million manats ($1.5 billion), in 2025 - to 2,891.5 million manats ($1.7 billion), in 2026 - to 2,379.8 million manats ($1.4 billion), and in 2027 - to 2,589.8 million manats ($1.5 billion).
