The European Bank for Reconstruction and Development (EBRD) has lowered its economic growth forecast for Turkey during 2023 to 2.5% from the previously projected 3%. The Bank improved GDP growth forecast for Armenia, expecting 5% in 2023 from previous 4%. As for Azerbaijan, EBRD expects the growth rate of the country’s economy in 2023 at the level of 2.5%, unchanged and in line with the February forecast figure.
Here is a rundown of the latest economic developments around Georgia's neighboring Turkey, Azerbaijan and Armenia during the last week.
Turkey
Turkey’s presidential election went to a runoff for the first time in its history, Turkey’s high election board confirmed Monday, May 15, as neither 20-year incumbent Recep Tayyip Erdogan nor challenger Kemal Kilicdaroglu secured an outright victory after the vote was held Sunday, May 14. A candidate must get more than 50% of the vote to win the highly-charged race. As no one passed that threshold, it was announced that the vote will go to a runoff election in two weeks, on May 28.
As the Turkey’s presidential election appeared headed for a runoff, On May 15, Turkey’s lira held near a two-month low, its sovereign dollar bonds tumbled and the cost of insuring exposure to the country’s debt spiked. Turkish bank stocks were also hammered in early trade on May 15, with the main banking index falling by more than 8%. The lira was at 19.65 to the dollar at 0833 GMT, after reaching 19.70 in earlier trading, its weakest since a record low of 19.80 hit in March this year following deadly earthquakes. It was on track for its worst trading session since early November. The Istanbul bourse was trading more than 2% lower, after an earlier 6.38% drop triggered a market-wide circuit breaker.
The European Bank for Reconstruction and Development (EBRD) has revised its growth forecast for Turkey in 2023, lowering it to 2.5% from the previously projected 3%. This adjustment results from the earthquake's impact in February and the anticipated credit tightening to address the country's external imbalances in the latter half of the year. The EBRD's Regional Economic Prospects report has slightly reduced the overall output forecast for all EBRD regions by 0.1% in 2023.
The central government budget of Turkey posted a deficit of TL 132.5 billion ($6.8 billion) in April, the Treasury and Finance Ministry said. The shortfall rose from TL 47.22 billion ($2.4 billion) in March. It pushed the cumulative deficit for 2023 so far to TL 382.5 billion ($19. 5 billion), mainly due to devastating earthquakes that ripped through the southeastern region in early February. Budget revenues came in at TL 268 billion ($13.6 billion), while expenditures amounted to TL 400 billion ($20.3 billion) last month, figures from the Treasury and Finance Ministry showed.
Turkey’s agriculture exporters have managed to maintain pace and lift their overseas sales to record in the first four months of this year despite multiple challenges. The demand remained robust despite geopolitical risks, prevailing concerns over supply and ongoing global challenges regarding food accessibility. Outbound shipments of Turkey’s agricultural sector totaled almost $11.2 billion from January through April, a 1.6% year-over-year increase, Turkish Exporters Assembly (TIM) data showed. The industry accounted for 13.8% of Turkey’s January-April exports, which amounted to almost $81 billion. The overall shipments dropped by 3% year-over-year due to the prolonged effect of the devastating earthquakes that struck the country’s southeast in early February and an adverse calendar impact from the Ramadan holiday. The gap widened sharply after the earthquakes that killed over 50,000 people, toppling hundreds of thousands of buildings and ripping the southeastern region’s infrastructure. In February, the budget deficit stood at TL 170.56 billion ($8.7 billion), and the cumulative figure for the first two months of the year was TL 202.8 billion ($10.3 billion).
In April, the secondhand online passenger and light commercial vehicle market in Turkey witnessed a decline of around 10% compared to last year, resulting in a total of 172,450 units sold. According to data collected from Indicata's secondhand online market report, there were a total of 327,273 corporate advertisements published on online channels during the previous month. Although there was a 1% increase in advertisements compared to April of the previous year, only 53% of the vehicles advertised (equating to 172,450 units) were sold. Out of the total sales, 82% were automobiles, while light commercial vehicles accounted for the remaining 18%. From January to April 2023, advertisements increased by 12%, with a 20% rise in sales compared to last year. Within the first four months, a total of 651,539 units were sold. Meanwhile, according to the engine types, diesel automobiles held the largest market share with sales totaling 103,259 units last month. Following closely behind were gasoline cars, which accounted for 62,339 sales, and auto gas cars with 2,247 units. The sales of hybrid cars reached 3,886, while secondhand electric cars saw a total of 719 electric car sales. Comparatively, in April 2022, only 583 used electric cars were sold.
Armenia
Armenia's economic growth is likely to moderate to 5.0 per cent in 2023 and 5.3 per cent in 2024, EBRD said in its latest Regional Economic Prospects report for May 2023. Armenia's economy grew by 12.6% in 2022, the highest growth recorded over the last 15 years. According to EBRD report, growth prospects are, however, clouded by the high geopolitical risks. In the previous report for February EBRD expected Armenian economy to grow by 4% in 2023 and up to 4.8% in 2024.
Armenia’s Prime Minister Nikol Pashinyan and Azerbaijan’s President Ilham Aliyev met in Brussels on Sunday, May 14, where they discussed border delimitation, reopening transport and economic links, and the release of two Azerbaijani soldiers captured in Armenia. The meeting was mediated by EU Council President Charles Michel, who held one-on-one meetings with both leaders prior to their discussion. Michel stated after the event that the conversation was ‘frank, open, and result-oriented’. The meeting came not long after four days of negotiations between the two countries’ foreign ministers in Washington. Michel described those talks as ‘positive’, and underscored the importance of maintaining momentum and taking ‘decisive steps’ towards the signing of a comprehensive peace agreement.
Armenia’s largest French-owned brandy company has stopped exports to Russia, Economy Minister Vahan Kerobyan said. Speaking to parliament members, Kerobyan said the move comes as part of French Pernod Ricard’s decision that owns the Yerevan Brandy Company to stop all exports of its international brands to Russia. The measure came into force at the end of April 2023. Pernod Ricard said also it will cease the distribution of its portfolio in Russia, a process that will take some months to complete. "We live in a difficult environment. Today we are discussing with procurers, among other things, the high exchange rate of the Armenian dram, the changes taking place in various markets. I certainly have not received official information from Pernod Ricard, but it seems to be official that the Yerevan Brandy Company has stopped exports to Russia. These are all issues that will have an impact on grape procurement. We must, in general, see what environment, what changes are taking place," said the minister in response to MP’s worries that the move will hit hard Armenian farmers and producers.
“Sanctions are our red lines,” Armenian PM Nikol Pashinyan said in an interview with the Czech magazine 'Respect' during his recent visit to the Czech republic. 'We are a member of the Eurasian Economic Union (EEU) and we have very close economic ties with Russia and Armenian businesses participate in the programs that were created in the recent period. We gladly meet the Russian demand wherever there is a vacant niche. Sanctions are our red lines. And we are clearly telling this to the Russians: we don’t want to hurt you, but we can’t afford to come under sanctions ourselves. There is no secret here,” Pashinyan said.
Azerbaijan
EBRD expects the growth rate of the Azerbaijani economy in 2023 at the level of 2.5%, in 2024 at 2.7%, according to the latest EBRD’s Regional Economic Prospects forecast. These figures remained unchanged and are in line with the February forecast. Output in the EBRD regions is expected to grow by 2.2 percent in 2023, a 0.1 percentage point downward revision relative to the forecasts published in February.
In the first quarter of 2023, $442.1 million was transferred from abroad to Azerbaijan, up 84.2% from the previous year, the Monetary Policy Review of the Central Bank of Azerbaijan (CBA) said. According to CBA, Azerbaijan’s currency market was down by 9% in the reporting period. In the first quarter of this year, transactions worth $7.8 billion were carried out in the currency market of Azerbaijan, down 9% compared to a year ago. Of the quarterly transactions, $6.8 billion were non-cash, and $1 billion were in cash, approximately 8% and 20% less than a year ago, respectively. Some 80.6% of non-cash transactions and 83.1% of cash transactions were in US dollars, while 19.4% and 16.9%, respectively, were in other currencies. During the year, the net sale of foreign currency in the country decreased by 6 times.
In January-April, electricity production from TPPs amounted to 9,266.1 million kWh, Azerbaijani Minister of Energy Parviz Shahbazov said. According to him, electricity production from renewable sources, including hydropower, amounted to 586 million kWh.
Electricity production in Azerbaijan during January-April increased by 6.5%, amounting to 9,852.1 mln kWh, exports to 1,244.1 million kWh, and imports to 41.1 million kWh.
Azerbaijan's agricultural production amounted to over 1.961 billion manats ($1.15 billion) in January-April 2023, 3.5% higher than a year earlier, the State Statistical Committee said. Over the past year, the crops increased by 3.2% to 165 million manats ($97 billion), and the prices of animal products went up by 3.5% to 1.796 billion manats ($1.06 million). Compared to 2022, meat production, including chicken, in live weight increased by 3.1% to 187,300 tons in 2023, milk production - by 1.8% to 697,600 tons, and egg production - by 13% to 726,500 units, and wool production dropped by 4.3% to 2,100 tons.
In January-April 2023, the nominal personal income in Azerbaijan amounted to 23,549.5 million manats ($13.85 billion), 15% more than in 2022. Last year, the nominal per capita income in the country increased by 14.3% compared to the previous year and reached 2,327 manats ($1,368).
The average monthly nominal wages of employees in Baku in January-February 2023 amounted to 1,083 manats ($636.35). The average monthly nominal wage in the Azerbaijani capital increased by 10.6% year-on-year. In January-February 2023, the average monthly nominal wages of employees in Azerbaijan increased by 11.2% and reached 854.5 manats ($502.01).
In January-April 2023, Azerbaijan’s budget revenues stood at 12.165 billion manats ($7.16 billion) and expenditures at 8,168.7 million manats ($4.8 billion), respectively, up 13.8% and 9.3% from the previous year. Consequently, the surplus amounted to 3,235.2 million manats ($1.9 billion), 28.4% more than the previous year.
