The World Bank’s Jobs and Prosperity: Fall 2025 ECA Economic Update projects uneven growth trajectories for the South Caucasus, with Georgia maintaining strong momentum, Armenia stabilising after several years of rapid expansion, and Azerbaijan slowing amid declining oil output and weak digital capacity.

Azerbaijan’s economy is expected to grow by 1.9% in 2025 and 1.8% in 2026, down from 4.1% in 2024. The World Bank attributes the slowdown to declining oil production and modest growth in the non-oil sector. Inflation remains within the Central Bank’s target range as of August 2025.

The report notes that Azerbaijan’s digital readiness remains low, with only 550 AI servers per million people, among the lowest levels in the Europe and Central Asia (ECA) region, compared with Bulgaria’s 54,100. Structural inefficiencies continue to limit job creation and private sector diversification.

Armenia’s economy is forecast to expand by 5.2% in 2025 and 4.9% in 2026, following rapid post-pandemic growth of 12.6% in 2022 and 8.3% in 2023. The report cites a “soft landing” as output returns to sustainable levels.

Remittances increased by 9.2% y/y between January and July 2025, offsetting the decline in transfers from Russia, with inflows from the EU and the United States rising sharply. Inflation is also within target, and the labour market remains responsive to productivity growth, particularly in manufacturing and high-skilled sectors.

Armenia’s technological infrastructure, however, remains underdeveloped, with fewer than 3,000 AI servers per million inhabitants — far below regional peers.

Georgia is expected to post 7.0% growth in 2025 and 5.5% in 2026, following an estimated 9.4% in 2024. Remittances rose 5% year-on-year in the first seven months of 2025, as decreased inflows from Russia (−30%) were offset by higher transfers from the EU and the US.

The report highlights Georgia’s strong digitalisation compared with Armenia and Azerbaijan but warns of rising policy inefficiencies. It estimates that job creation is highly sensitive to fiscal distortions: a 1 percentage point increase in revenue-related distortions could reduce employment by 1.37% — the highest elasticity among ECA countries.

The World Bank projects average growth of just over 3% for the South Caucasus in 2025–26. While Armenia and Georgia are expected to maintain solid expansion supported by remittances and consumption, Azerbaijan’s performance will hinge on its ability to offset lower oil production with reforms and investment in non-oil sectors.

Inflation remains contained across all three countries, though digital infrastructure gaps and structural constraints continue to weigh on productivity and employment:

Country	2025 GDP growth	2026 GDP growth	Inflation (Aug 2025)	Key driver
Armenia	5.2%	4.9%	Within target	Remittances, services
Azerbaijan	1.9%	1.8%	Within target	Oil output decline
Georgia	7.0%	5.5%	Within target	Consumption, investment

The World Bank said structural reforms and digital investment remain essential to boost productivity, attract private capital, and create better-quality jobs in the South Caucasus economies.