Turkish President Recep Tayyip Erdogan appeared to make a crucial shift regarding the future of his inflation-ridden country’s monetary policy. Erdogan said he would accede to his new finance minister’s outlook on interest rates in Turkey, meaning a return to economic orthodoxy after years of heavy state control over the central bank and refusing to raise interest rates despite soaring inflation. Armenia’s Central Bank has revised upwards its growth forecast for the country’s economy in 2023 to 6.9% from 5.8% forecast made earlier in March, 2023. With the expansion capacity of the Trans-Anatolian Natural Gas Pipeline (TANAP) Project, Azerbaijan will correspondingly increase its gas exports to Turkey to 10.2 billion cubic meters (bcm) per year.
Here is a rundown of the latest economic, business and political developments around Georgia's neighboring Armenia, Turkey and Azerbaijan during the last week.
Armenia
The Central Bank of Armenia expects re-exports and imports to decline during this year compared to last year's peaks, the head of the regulator Martin Galstyan said. "I believe that this phenomenon is a link in the overall chain in the context of the reaction of international partners. For example, there are firms in partner countries, which require assurances when selling goods that they will be sold in your economic jurisdiction and will not be re-exported," he explained. Galstyan also thinks that the higher the share of such control mechanisms is, the stronger will be the reduction of re-export operations. According to the statistics, Armenia's foreign trade turnover grew by 99.4% y-o-y in the first 4 months of 2023 to $5.8bln. Exports amounted to $2.2bn with a 2.1-fold increase and imports rose by 93.9% to $3.6bn.
Russian agricultural watchdog Rosselkhoznadzor has removed the ban on imports of dairy products of a number of Armenian companies, the press service of the Armenian Food Safety Inspection Authority reported. On April 5, Rosselkhoznadzor asked Armenian companies to suspend export of dairy products to Russia. The formal reason for the ban was the use of Iranian milk (banned in Russia) by Armenian dairy companies. It also cited lack of “proper oversight” by relevant Armenian authorities due to which low-quality and unsafe products could be exported to Russia.
Armenia’s Central Bank has revised upwards its growth forecast for the country’s economy in 2023 to 6.9% from 5.8% forecast made earlier in March, 2023. According to the chairman of the Central Bank Martin Galstyan, the 1% upward revision is prompted by higher than expected growth in such sectors as services and construction. According to the current forecasts of the Central Bank, the services sector is expected to grow this year by 7.8% and construction sector by 15.7%. Armenia's government growth projection for 2023 is set at 7%, and inflation is set at 4% (±1.5%). The European Bank for Reconstruction and Development (EBRD) expects Armenia's economy to grow by 4% in 2023 and by 4.8% in 2024. The Asian Development bank said Armenia's economic growth will slow down to 6.5% in 2023 and to 5.5% in 2024 depending on domestic and external demand and the International Monetary Fund (IMF) said in its latest World Economic Outlook report for April 2023 that it expects Armenia's economy to grow by 5.5% in 2023. The WB says in its latest report "Global Economic Prospects, June 2023" that it expects Armenia's economy to grow by 4.4% in 2023.
IMF confirmed Armenian GDP growth forecast of 5.5%. The IMF’s economic outlook for 2023 is generally positive, although risks remain substantial, IMF said after its Executive Board completed the first review under the Stand-By Arrangement (SBA) with Armenia. The completion of the review enables access of SDR 18.4 million (about US$24.5 million), bringing total access to SDR 36.8 million (about US$49 million). The IMF believes that GDP growth will decelerate but strong momentum, consumption and investment are expected to keep it at 5.5 percent in 2023. With services trade and remittances normalizing, the current account deficit is expected to widen in 2023.
On June 13, Armenia's Central Bank has cut the key refinancing rate by 0.25 percentage points to 10.5. The Lombard repo rate has also been lowered to 12.0% and the borrowing rate for commercial banks has been reduced to 9.0%. Previously, the Central Bank changed the refinancing rate on December 13, raising it by 0.25 percentage points to 10.75%.
Armenia is one of the leading countries in terms of Gini index. Armenia's Gini index, which is used to measure income distribution across different population groups, was 0.27 in 2021, Finance Minister Vahe Hovhannisyan said. "The Gini index is an important indicator, although little is said about it in Armenia. Nevertheless, it characterizes the inequality of the distribution of wealth created in the country between different groups of the population. The index ranges from 0 (or 0%) to 1 (or 100%), with 0 representing perfect equality and 1 representing perfect inequality,' the minister said.
Armenia ranks 56th on the list of the cleanest countries in the world, according to the Environmental Performance Index 2022. The country has improved its position by 4.8 points over the last 10 years. Armenia's neighbors Georgia is 103rd, Azerbaijan is 104th, Russia is 112th, Iran is 133rd and Turkey is 172nd out of 180 countries surveyed. The Environmental Performance Index measures a country's environmental and natural resource management accomplishments based on 22 indicators in 10 categories that reflect various aspects of the environment and the vitality of its ecological systems, biodiversity conservation, climate change mitigation, public health, economic activity and environmental stress, and government environmental policy effectiveness.
Armenia ranks 75th most miserable country out of the 157 countries featured in the Hanke’s 2022 Misery Index, released by the US-based John Hopkins research university. According to the index, Armenia’s neighbors Turkey ranks 10th, Iran - 19th, Georgia -36th, Azerbaijan- 62nd, and Russia -76th. In the 2022 ranking, each country's score was determined by an equation that took into account factors such as unemployment, inflation, bank-lending rates, and the percentage change in GDP. Zimbabwe, Venezuela, Syria, Lebanon, Sudan, Argentina, Yemen, Ukraine, Cuba, Angola, Tonga, and Ghana are the most miserable countries in the world. Thanks to strong economic performances, Switzerland, Kuwait, Ireland, Japan, Malaysia, Taiwan and Malta were the top-ten “happiest” countries in 2022.
Turkey
Turkish President Recep Tayyip Erdogan on Wednesday appeared to make a crucial shift regarding the future of his inflation-ridden country’s monetary policy. Erdogan said he would accede to his new finance minister’s outlook on interest rates in Turkey, meaning a return to economic orthodoxy after years of heavy state control over the central bank and refusing to raise interest rates despite soaring inflation. Newly-appointed Finance Minister Mehmet Simsek, who previously served as deputy prime minister and finance minister between 2009 and 2018, is widely respected by investors. Economists and analysts see Simsek as someone who can turn the tide in Turkey’s cost-of-living crisis, which has seen the Turkish lira’s value against the dollar fall some 80% in the last five years.
Turkey's gaming enterprises attracted investments of $333 million during the first half of the year, the largest in Europe. According to data compiled from the Digital Transformation Office of Turkey's presidency on Tuesday, the figure jumped 60% from the same period of last year. The UK followed it with $158 million, Norway with $60 million, Finland $53 million, and Sweden with $24 million. While some $600,000 were invested in the Turkish games industry in 2017, the figure rose to $1.8 million in 2018, $8.4 million in 2019, $14.4 million in 2020, and $264 million dollars in 2021. Istanbul was the second city with the largest number of deals in the gaming industry in Europe last year and ranked 5th globally. Some 92.3% of internet users play video games in Turkey, over the world average of 81.9%. With a volume of $1.2 billion in 2023, mobile games constitute the largest part of the market.
Turkey's unemployment rate was at 10.2% in April, up 0.1 percentage point from the previous month, the country's statistical authority said. TurkStat stated that the number of unemployed persons - aged 15 years old and over - was up by 74,000 to 3.58 million persons month-on-month in April. The unemployment rate was 8.1% for men and 14.3% for women in April. It noted that the employment rate in the country was at 48.4% in April while the number of employed persons rose by 521,000 to 31.6 million persons over the same period. It added: "The youth unemployment rate in the 15-24 age group was 19.1% with 1.2 percentage point decrease compared to the previous month. "While this rate was estimated 15.7% for men and 25.4% for women." In April, the unemployment rate was 4.8% on average in the Organization for Economic Cooperation and Development (OECD) area.
Turkey welcomed more than 299,000 cruise passengers from January to May, surging 114% from a year ago, the country's transportation minister said. Cruise tourism gained momentum after Istanbul's new mega Galataport became operational in the last quarter of 2021, Abdulkadir Uraloglu said in a statement. "Cruise tourism investments will continue and 'Century of Türkiye' will be the century of cruise tourism," he said. The number of cruise ships docked at Turkey's ports soared 43.1% year-on-year in the first five months of this year. A total of 157,940 cruise passengers were hosted at Kusadasi Port on Turkey's Aegean coast, 67,740 at Galataport, 3,276 at Istanbul's TDI Sarayburnu dock, and 14,777 passengers at Antalya port, he said.
Turkish President Recep Tayyip Erdogan said his country is ready to open a consulate in Shusha, a city that Azerbaijan took from Armenian forces in a war in 2020. Erdogan made the comment during a visit to Azerbaijan at the start of his third term in office following presidential elections last month. “We are ready to open our consulate whenever you wish,” Turkey’s state-run Anadolu Agency quoted Erdogan as telling Azerbaijani President Ilham Aliyev and other officials at the start of bilateral talks. “If we can open a consulate in Shusha, this would be a message to the world and especially to Armenia,” he said. Shusha, a center of Azeri culture for centuries, came under Armenian control in 1992 in fighting over the separatist Nagorno-Karabakh region. Its retaking by Azerbaijan’s forces in 2020 was of symbolic and strategic importance because it sits high above the region’s nearby capital, Stepanakert.
Azerbaijan
In January-May 2023, Azerbaijan produced a GDP worth 49.58 billion manats ($29.127 billion) - 0.7% more year-on-year, the country’s State Statistics Committee said. Over the past year, value added in the oil and gas sector of the economy decreased by 2.5%, while in the non-oil-gas sector, it increased by 4%. According to the committee, 45.5% of GDP production falls on industry, 9.1% - on trade; repair of vehicles, 6.1% - on transport and storage, 4.5% - on construction, 3.6% - on agriculture, forestry and fisheries, 2.2% - on tourist accommodation and catering, 1 .6% - on the information and communication, and 17.9% - on various other spheres. Net taxes on products and imports amounted to 9.5% of GDP. During the past year, the value of GDP per capita in the country decreased by 3.4% and amounted to 4,891 manats ($2,873).
Azerbaijani natural gas export increased by 9.6% in January-May, said Energy Minister Parviz Shahbazov. "4.8 bcm of gas was exported to Europe, 4.3 bcm to Türkiye, and 1.2 bcm to Georgia. During this period, TANAP supplied Türkiye with 2.4 bcm of gas," he tweeted. In January-May, oil-condensate production of Azerbaijan was 12.7 million tons, and export was 10.6 million tons. “During this period, 10.3 bcm out of the 20.2 bcm of gas produced, with an increase of 3%, was exported,” the minister.
In January-May 2023, Azerbaijan imported 40,264 vehicles worth $611.968 million, respectively, up 40.4% and 65.6% from the previous year. The number of cars with a capacity of ten or more seats declined by 4.8 times to 61 ($4.117 million), and the number of passenger cars and other motor vehicles increased by 41.6% to 37,394 ($ 549.138 million). Of these, 5,884 ($125.575 million) are hybrid vehicles, and 812 ($34.383 million) are electric cars, respectively, up 15.8% and 6.2-fold from the previous year. Meanwhile, import of the vehicles for cargo transportation rose by 42.2% to 2,633 ($39.490 million), and special cars surged by 35.4% to 176 ($19.223 million).
With the expansion capacity of the Trans-Anatolian Natural Gas Pipeline (TANAP) Project, Azerbaijan will correspondingly increase its gas exports to Turkey to 10.2 billion cubic meters (bcm) per year, Azerbaijan's Ambassador to Turkey, Rashad Mammadov said. According to the Natural Gas Market 2022 Sector Report of Turkey's Energy Market Regulatory Authority, out of Turkey's total imports of approximately 54.6 bcm of gas last year, Azerbaijan exported 8.7 billion cubic meters. This year, this capacity increased by 1.5 bcm to 10.2 bcm, representing a 17% annual rise. Since starting operations on June 12, 2018, 46 bcm of gas have been transported through TANAP, of which 22 bcm were destined for Turkey and 24 bcm for Europe, Mammadov explained.
In order to strengthen human capital in Azerbaijan, it is important to invest more in education, World Bank Lead Economist for the South Caucasus Arvind Nair said. He added that another important element, in addition to improving the productivity of the private sector, is human capital: “Today, human capital around the world is critical for long-term growth. In our report, we noted that more investment in education is needed to strengthen human capital. Our study and the results were taken into account by the country’s socio-economic development strategy and the growth model specified in it.”
