South Caucasus Economic Growth Projected at 3.5% Average Through 2026

Economic growth in the South Caucasus region is projected to average 3.5% during 2025-26, representing a moderation from previous years as spillovers from trade intermediation, labor mobility, and capital inflows gradually diminish according to international financial institutions.

The growth forecast encompasses Armenia, Azerbaijan, and Georgia, three countries that experienced elevated economic activity in 2023-2024 partly due to trade rerouting effects following Russia's isolation from Western markets. As these temporary factors normalize, the region is returning to more sustainable but slower expansion rates.

According to Eurasianet, the regional economic outlook is being reshaped by several structural developments, including the implementation of the Trump Route for International Peace and Prosperity (TRIPP) following the August 2025 Armenia-Azerbaijan peace framework, and ongoing diversification efforts in each country.

Georgia recorded a current account surplus of $338.8 million in the third quarter of 2025, reflecting continued strong export performance and remittance inflows. The country's economy benefits from its position as a regional logistics hub and growing sectors including tourism, agriculture, and services.

Azerbaijan's growth trajectory remains closely tied to global energy markets, though the expanding non-oil sector now accounts for more than half of GDP. Armenia's economy is adjusting to reduced trade intermediation volumes while seeking to develop its technology, agriculture, and mining sectors as alternative growth engines.

The World Bank emphasized that accelerating growth in Europe and Central Asia, including the South Caucasus, will require greater focus on entrepreneurship, technology adoption, and innovation rather than relying on temporary external factors that boosted recent performance.

Further Reading

• TRIPP Corridor Development