The economies of Armenia, Azerbaijan and Georgia are enjoying some of their highest growth rates in years, the European Bank for Reconstruction and Development (EBRD) reports in its latest Regional Economic Prospects (REP).

Azerbaijan is capitalising on high levels of oil and gas revenues, as a result of elevated prices and increased export revenues, but also on the strong performance of its non-energy sector.

Armenia and Georgia are benefiting from an inflow of Russian businesses and information and communication technology professionals, boosting the service sectors of these small economies.

However, the robust growth recorded for the region in 2022 will taper off in 2023, highlighting concerns about its medium-term sustainability. The report warns that current growth in the Caucasus is mainly driven by temporary factors that could easily be reversed.

For Azerbaijan, the uncertainty stems from energy prices but also from inflation. For Georgia the risks are driven by uncertainty and the significant probability of external shocks. In the case of Armenia, these are further amplified by the country’s close ties to an increasingly isolated Russian economy.

According to the report, the expected growth of 8 per cent in Armenia’s economy this year is likely to decelerate to 4 per cent in 2023.

In Armenia, the solid recovery seen in 2021 carried strong growth momentum into 2022, with economic growth reaching 13.1 per cent in the period from January to July. The arrival of many people and firms from Russia led to an increase of 113 per cent in foreign inflows and boosted demand for services.

This has helped Armenia to finance its widening trade deficit. Foreign reserves have also increased by 20 per cent.