BizAims

Like other former States, Caucasus states economy suffers from the legacy of a centrally planned economy and the breakdown of former Soviet trading patterns. Soviet investment in and support of industry has virtually disappeared, so that few major enterprises are still able to function. On an individual basis, nearly all of the Caucasus states grew very fast in 2007, the ADB reported. Azerbaijan possessed the fastest-growing economy, with recorded growth of 25.4 percent. Armenia’s economy expanded by 13.7 percent and Georgia’s by 12 percent.

Armenia:

The Armenian economy heavily relies on investment and support from Armenians abroad. Before independence, Armenia's economy was largely industry-based – chemicals, electronics, machinery, processed food, synthetic rubber, and textile – and highly dependent on outside resources. Agriculture contributed only 20% of net material product and 10% of employment before the break-up of the Soviet Union in 1991. GDP fell nearly 60% from 1989 until 1992–1993. The republic had developed a modern industrial sector, supplying machine tools, textiles, and other manufactured goods to sister republics in exchange for raw materials and energy. Armenian mines produce copper, zinc, gold, and lead. The vast majority of energy is produced with fuel imported from Russia, including gas and nuclear fuel (for its one nuclear power plant); the main domestic energy source is hydroelectric. Small amounts of coal, gas, and petroleum have not yet been developed. New sectors, such as precious stone processing and jewellery making, information and communication technology, and even tourism are beginning to supplement more traditional sectors in the economy, such as agriculture. This steady economic progress has earned Armenia increasing support from international institutions. The Gross Domestic Product of Armenia is estimated in 2006 to be 6.6 billion US dollars per calendar year and the GDP per capita (purchasing power parity) is estimated at $5400 US. The growth rate is high at 13.4%, but the relatively low base must be considered. Low inflation is maintained around 2.6% annually.

Azerbaijan:

After gaining independence in 1991, Azerbaijan became a member of the International Monetary Fund, the World Bank, the European Bank for Reconstruction and Development, the Islamic Development Bank and the Asian Development Bank. Azerbaijan is an economy that has completed its post-Soviet transition into a major oil based economy (with the completion of the Baku-Tbilisi-Ceyhan Pipeline), from one where the state played the major role. GDP grew an astonishing 41.7% in the first quarter of 2007. Pushed up by spending and demand growth, the 2007 quarter 1 inflation rate reached 16.6%. Nominal incomes and monthly wages climbed 29% and 25% respectively against this figure, but price increases in non-oil industry encouraged inflation in the country. Azerbaijan shows some signs of the so-called "Dutch disease" because of the fast growing energy sector, which causes inflation. Two thirds of Azerbaijan is rich in oil and natural gas. The region of the Lesser Caucasus accounts for most of the country's gold, silver, iron, copper, titanium, chromium, manganese, cobalt, molybdenum, complex ore and antimony. At the beginning of 2007 there were 4755100 hectares of utilized agricultural area. In the same year the total wood resources counted 136 million m³. Azerbaijan is an important economic hub in terms of the raw materials transportation. It also plays a major role in the EU-sponsored Silk Road Project.

Georgia:

Throughout Georgia's modern history agriculture and tourism have been principal economic sectors, due to the country's climate and topography. Since the fall of the USSR in 1991, Georgia embarked on a major structural reform designed to transition to a free market economy. However, as all other post-Soviet states, Georgia faced a severe economic collapse. The civil war and military conflicts in South Ossetia and Abkhazia aggravated the crisis. By 1994 the gross domestic product had shrunk to a quarter of that of 1989. The first financial help from the West came in 1995, when the World Bank and International Monetary Fund granted Georgia a credit of USD 206 million and Germany granted DM 50 million. By 2006 poverty decreased to 34%. In 2005 average monthly income of a household was GEL 347 (about 200 USD). Since early 2000s visible positive developments have been observed in the economy of Georgia. In 2006 Georgia's real GDP growth rate reached 8.8%, making Georgia one of the fastest growing economies in Eastern Europe. However, the country has high unemployment rate of 12.6% and has fairly low median income compared to European countries. Georgia's economy is becoming more devoted to services (now representing 54.8% of GDP), moving away from agricultural sector (17.7%). The country has sizable hydropower resources. Georgia is becoming more integrated into the global trading network: in 2006 it imports and exports account for 10% and 18% of GDP respectively. In 2004, a 12% flat income tax was introduced.