Page 19 - Caucasus Outlook 2025

3.0 External Environment 3.1 External Environment – Georgia
Georgia's exports rose by 7.4% y/y to $5.5bn in the first ten months of 2024, while imports increased by 4.8% to $13.6bn, according to Geostat’s latest data released in mid-November. This resulted in a trade deficit of $8.1bn, 42.5% of the total trade turnover.
Turkey led as Georgia’s top trading partner, followed by Russia and the US. Kyrgyzstan was Georgia’s main export destination.
Domestic demand has driven imports to grow faster than exports, a trend expected to stabilise in 2025 and 2026 as rising service exports offset import increases, according to the European Commission.
The geopolitical impact of Russia’s 2022 invasion of Ukraine has elevated Georgia’s role as a transit hub within the Middle Corridor, a key trade route bypassing the Northern Corridor disrupted by the conflict.
Despite the EU’s Association Agreement with Georgia, signed in 2014, the bloc’s share of Georgian exports dropped from 22% in 2014 to 12% in 2023. This decline reflects challenges such as limited production capacity, compliance costs for EU standards, high transport costs and a lack of diversification in Georgian exports, which are largely raw materials and seasonal agricultural goods.
Additionally, analysts have pointed out that Georgia's trade structure raises concerns about its role as a re-export hub for EU goods potentially circumventing sanctions on Russia. Increased trade volumes through Georgia, including re-exports of used vehicles and oil products, suggest that the country could inadvertently facilitate the flow of restricted goods into or out of Russia, creating potential risks for sanction enforcement.
3.2 External Environment – Armenia
Exports in Armenia continued to show robust growth in 2024, climbing by 17% y/y. This expansion was primarily driven by strong performances in the mining sector, particularly copper and molybdenum exports, alongside significant contributions from the textile industry and the rapidly growing IT services sector. The diversification of trade destinations played a crucial role, with notable increases in exports to Middle Eastern and Asian markets, while the European Union and the Eurasian Economic Union (EEU) remained dominant trade partners,
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