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Fitch: Economic growth is strong in Caucasus countries, but geopolitical risks persist

11 December 2025 11:37 (UTC +04:00)

The international rating agency Fitch Ratings has announced that economic growth in the Caucasus region will be high for 2026, but geopolitical and currency risks will continue, APA-Economics reports, citing Fitch Ratings.

According to the agency, Georgia and Armenia will maintain an economic growth rate of about 5% in 2026. Large investment projects and strong performance of the service sector in Georgia, and a soft fiscal policy in Armenia, are indicated as the main factors supporting growth.

At the same time, the fact that a peace agreement between Azerbaijan and Armenia has not yet been signed is considered one of the main political risks for the region. Fitch notes that the conclusion of the peace process may be difficult in the context of Armenia's parliamentary elections to be held in June 2026.

The report emphasizes that the opportunities for monetary easing remain limited due to the resurgence of inflationary pressures in the Caucasus countries. In conditions of high financial dollarization, central banks prefer to take a cautious stance against the backdrop of external volatility and domestic political risks.

Fitch says that the level of public debt in the region is lower than in Central and Eastern Europe (CEE), but the high share of debt in foreign currency increases currency risks.

According to the agency's assessment, countries outside CEE, including the Caucasus, have increased their foreign exchange reserves in recent years. Current account deficits are mainly covered by foreign direct investment and official financing.

Fitch attributed the main risk factors for CEE, including the Caucasus, to the continuation of the war in Ukraine, uncertain trade policy related to US tariffs, increasing hybrid threats from Russia, the prolongation of the Azerbaijan-Armenia peace process, and the stalling of Georgia's EU integration process.