World Bank cuts 2020 GDP forecasts for Georgia, Armenia and Azerbaijan

FILE PHOTO: A participant stands near a logo of World Bank at the International Monetary Fund - World Bank Annual Meeting 2018 in Nusa Dua, Bali, Indonesia, October 12, 2018. REUTERS/Johannes P. Christo/File Photo

TBILISI (Reuters) - The World Bank has cut its 2020 economic growth forecasts for Georgia, Armenia and Azerbaijan because of the coronavirus crisis but expects the three South Caucasus nations to recover next year.

The South Caucasus economy is expected to contract by 4.9%, the World Bank said in its economic update report, citing prolonged pressure from the pandemic and low commodity prices.

“Activity is projected to pick up to 2.7% in 2021, as the shocks related to the COVID-19 pandemic dissipate and tourism recovers alongside improving consumer and business confidence in Armenia and Georgia,” the bank said.

“Activity is expected to firm in Azerbaijan in 2021 as oil prices stabilise, but the overall recovery will be muted.”

The World Bank said that the downside scenario for 2021 projected a much weaker recovery, with 1.8% growth.

Georgia’s gross domestic product is expected to shrink by 6% in 2020, reflecting mobility restrictions at the start of the pandemic, job losses and continued restrictions on international tourism. The bank projected 4% growth in 2021, having previously forecast a 4.8% contraction in 2020 and 4% growth in 2021.

The bank expects Armenia’s economy to shrink by 6.3% in 2020 but expand by 4.6% in 2021. It had previously forecast a 2020 contraction of 2.8% and 4.9% growth in 2021.

GDP in oil-rich Azerbaijan is expected to contract by 4.2% in 2020, down from a previous forecast of 3%, but the bank expects a 1.9% rebound next year, up from a previously forecast of 2.5%.

The World Bank drafted its forecasts before a flare-up in the conflict between Azerbaijan and Armenian forces over Azerbaijan’s breakaway Nagorno-Karabakh region.

Reporting by Margarita Antidze and Nvard Hovhannisyan; Editing by David Goodman