EBRD Lifts Georgia to 6.5%, Keeps Armenia and Azerbaijan

The European Bank for Reconstruction and Development has raised its 2026 growth forecast for Georgia by half a percentage point to 6.5%, while leaving Armenia at 5.5% and Azerbaijan at 2.0%, in its September Regional Economic Prospects report. The revisions confirm a three-speed South Caucasus: two fast-growing, trade-driven economies and one hydrocarbon economy growing slowly.

Georgia: broad growth, sticky inflation

The EBRD estimates Georgian real GDP grew 7.9% year on year in the first half, slowing from 9.0% in the first quarter to 7.0% in the second. Official second-quarter data tell a similar story. Growth was spread across ICT, manufacturing, transport and warehousing, and financial services, while goods exports rose an estimated 20% against import growth of only 2.3%.

The external position has improved sharply. The rolling current-account deficit narrowed to 1.9% of GDP in the first quarter from 6.0% a year earlier, and reserves hit a record $8.1 billion at the end of August, 128.2% of the IMF's adequacy benchmark. The weak points are tourism receipts, down 2.0%, and inflation, which reached 5.6% in August against the National Bank of Georgia's 3% target. The bank expects growth of 5.5% in 2027.

Armenia: steady, with policy tightening

Armenia's 5.5% forecast is unchanged from June. The Eurasian Development Bank is slightly more optimistic at 6%, and official data show economic activity up 7.7% in January to July. The Central Bank of Armenia raised its policy rate to 6.75% in September, its first hike in several years, signalling that it sees upside risks to prices even as inflation eased to 4.4% in August.

Azerbaijan: the non-oil engine carries the load

Azerbaijan's 2.0% forecast is also unchanged. The EBRD notes the economy has returned to moderate growth after a slow start to the year, mainly on the back of the non-oil sector, and pencils in 2.5% for 2027. The oil and gas sector remains a drag as mature fields decline. New upstream projects such as the Absheron expansion will not add volumes until the end of the decade.

The macro buffers remain large. Strategic reserves are near $91 billion, giving Baku room to fund investment even with low headline growth.

What could change the picture

Forecasts in this region are sensitive to three variables: Russian demand and remittances, oil prices, and the pace of Middle Corridor trade. A sharper slowdown in Russia or a fall in oil prices would hit Armenia and Azerbaijan first. For Georgia, the risk is the reverse: strong inflows and credit growth that keep inflation above target and force tighter policy.

Sources: EBRD Regional Economic Prospects, September 2026; Caucasus Watch; Eurasian Development Bank.