The spread of the coronavirus across the globe has begun to impact the global economy. According to Bill Conerly, a senior contributor to Forbes, “its economic consequences are highly uncertain, [with] the most likely [effect being that] the world will see rolling recessions as the disease spreads to different areas, with economic recovery as the local epidemics die down.” 

The economies of the three South Caucasus countries of Armenia, Azerbaijan and Georgia might also suffer under the effects of the virus.

Armenia

Armenia’s Central Bank released a statement confirming that it “is closely monitoring global economic developments” related to the ongoing coronavirus outbreak worldwide. According to the Central Bank, the impact of the outbreak “on both the world economy and the Armenian economy is expected to be short-term”, with the Central Bank preparing measures to “ensure price and financial stability in Armenia” if necessary.

According to the Armenian political analyst Mark Dovich, the economic impact of the coronavirus outbreak on the Armenian economy is expected on three main dimensions. First, the Armenian economy is quite sensitive to the global price of copper, which has fallen significantly in recent months, as worldwide demand continues to decline.  The current price of copper per metric ton is around 5,700 U.S. dollars, a five-month low, down roughly 600 U.S. dollars since January. Armenia has considerable deposits of copper, gold, and molybdenum, and the mineral industry represents a major sector of the Armenian economy. Indeed, about 30 percent of Armenia’s total exports are copper ore, and another roughly 30 percent of the country’s exports are other ore concentrates, metals and gems. The primary destinations for Armenian minerals are China, the European Union, and Russia.

Secondly, Armenia has strong economic links with Russia, and so any developments in the Russian economy have meaningful ripple effects in the Armenian economy. Trade with Russia accounts for about 25 percent of Armenia’s total trade, and Russia is Armenia’s largest market for the export of agricultural and other goods. Moreover, nearly half of the roughly two billion U.S. dollars in annual remittances sent to Armenia from Armenian migrant workers and Armenian diaspora communities come from Russia. The Armenian economy remains heavily dependent on remittances, which represent roughly 15 percent of the country’s total GDP. 

Thirdly, the decline in international travel due to the coronavirus outbreak is expected to negatively impact Armenia’s tourism industry, which has experienced considerable growth in recent years. Armenia’s suspension of its visa-free regime with China, the closure of its border with Iran, and the deteriorating economic situation in Russia are set to impact the country’s tourism sector, as all three countries are major countries of origin for foreign tourists visiting Armenia. That the closure of the Armenian-Iranian border covers the period of Nowruz, the Iranian New Year, is particularly significant, as thousands of Iranians typically visit Armenia for the holiday.

Azerbaijan 

The commercial banks in Azerbaijan have already set a limit on the sale of euros and dollars at 500-1,000 dollars for an individual as a consequence of the fall of the oil prices (Caucasus Watch reported).

Azerbaijani President Ilham Aliyev assured the public on 11 March that the economy won't suffer any considerable losses and that the country’s economic indicators were very positive in the last two months. “The growth in non-oil industrial production is 21.7%. This is due to the development of the non-oil sector in recent years. Because there is no such growth in the oil sector, on the contrary, production is falling, and prices fell completely yesterday. Over the two months, household incomes grew by 9%, inflation was only 2.8%. I am sure that this trend will continue. True, the excitement over the Corona Virus willy-nilly affects us,” he said.

The Azerbaijani political analyst Ilyas Huseynov also considers that the coronavirus won't have a major impact on the economy of Azerbaijan. “A number of important steps have been taken towards the development of the non-oil sector. Today, the country's economy is fully prepared for economic problems. The volume of strategic reserves of Azerbaijan is $52 billion, which exceeds Gross Domestic Product (GDP) by over 8 percent. External debt is 17 percent of GDP. This is one of the lowest rates in the world,” he noted.

"In 2019, strategic foreign exchange reserves exceeded GDP by 100 percent and external debt 6 times. There are all possibilities to maintain stability in the foreign exchange market and the manat exchange rate," he added.

“However, along with the foregoing, it is also necessary to strengthen control over the consumer market. In relation to people who try to abuse the situation, raise prices and create an artificial shortage by removing goods from circulation, the most stringent measures should be taken [to hinder these actions],” Huseynov warned.

According to IMF data, Azerbaijan needs an oil price of around $53 per barrel to balance its budget.  Because the government fears unrest, “it is impossible to cut social payments, which are almost 65 percent of the state budget,” Gubad Ibadoglu, an economist from Azerbaijan, said in an interview with Eurasianet.org. “The only way [to save] is to cut the investment budget and the defense budget. It’s not easy to cut the defense budget […] and the investment budget was already smaller [in 2020] than last year.”

Georgia 

On 11 March, the Government of Georgia, the National Bank of Georgia (NBG) and commercial banks held a meeting in order to take active measures in coordination to mitigate the negative impact of coronavirus COVID-19 on the country’s tourism sector.

According to the government's press service, they decided to establish an effective working mechanism with an engagement of an economic team of the government, National Bank’s and banking sector officials to suggest a plan of actions with specific steps in support of the tourism sector in the coming days.

“The banking sector has made its readiness clear to provide maximum support in various forms if and when the tourism sector representatives encounter certain problems in servicing their loans as a result of COVID-19. Participants of the meeting have agreed that the most pressing task today is to keep as much cash resources in the vulnerable sectors as possible to avoid obstacles in the implementation of current projects,” read the statement. 

The tourism sector in Georgia is considered to suffer the biggest losses in the country compared to other sectors. According to the National Tourist Administration in Georgia, in February 2020, the number of international visits to Georgia amounted to 466.4 thousand, which is 0.7% less than the data for the same period last year. Last month, the number of travellers from China (-59.5%), Russia (-25%), Armenia (-18.2%), India (-9.9%) and Iran (-8.7%) was significantly reduced. The tourism administration warned that March figures could be even worse.

“According to the International Air Transport Association (IATA), due to the rapid spread of coronavirus, the loss of international aviation in two months has already reached 4.9%. Annual losses for the year can reach 13%, which means a reduction in aviation sector revenues by $ 28 billion. Based on objective international trends, it is expected that March will be full of great challenges in the tourism and aviation industry both in Georgia and around the world,” read the statement of the administration in regard to the impact on the flight traffic to Georgia.

According to the Georgian political analyst Emil Avdaliani, negative effects for the Georgian economy are also expected from a possible drop in bilateral trade with China. According to the 2019 data, Georgia exported $858 million worth of goods to China, which is significant for Georgia’s minor economic potential. This makes China among the country’s top three importers, with a steady rise in comparison with previous years (2017 – $732.6 million, 2018 – $833.9 million).

A worst-case scenario would predict the overall decrease in demand for Georgian products, which will mean a decrease in the volume of the country’s exports. There could also be a considerable decrease in foreign investments in the light of a possible reduction of exported capital globally. Another likely possibility could be the diminution of remittances from Georgian emigrants, especially in Italy and other European states.

Yet, Avdaliani considers that the negative impact of the virus on the Georgian economy won't be large and that even positive outcomes are possible.  First is the fact that the tourist season in Georgia has not yet started; it is expected that by April-May, when the first large numbers of foreign tourists are expected in the country, the coronavirus will likely have been contained. Even with a very limited number of tourists from Iran and China, the impact on the Georgian economy is unlikely to be large, as throughout 2019 these two groups of tourists spent only $190 million (out of $3.5 billion which the tourism sector amounts in the country). 

There is also the factor of the lari, Georgia’s national currency, which, after depreciating throughout 2018-2019, became significantly stronger by levelling at 2,79 to 1 USD.

Finally, a further stabilizing long term factor is Georgia’s expected economic growth of more than 4% for 2020. Given the above negative factors and considering the likelihood that negative effects will remain for most of 2020, it is likely that the growth will still remain at least near the 3.5% mark.