## Media Brief: Caucasus and Central Asia

## Source details

**Canonical URL:** [Media Brief: Caucasus and Central Asia](https://www.imf.org/-/media/files/publications/reo/mcd-cca/2025/october/english/october-2025-reo-key-messages-cca.pdf)

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### Key messages and takeaways
- The Caucasus and Central Asia (CCA) region has shown continued economic resilience in 2025 despite high global uncertainty and renewed geopolitical tensions.
- Real GDP growth is projected to remain strong at 5.6% in 2025.
- The 2025 growth projection reflects an upward revision of 0.7 percentage point compared to the IMF’s May REO.
- Growth drivers in 2025: solid domestic demand, credit expansion, and hydrocarbon exports.
- Medium-term growth projection: slow gradual decline to an estimated rate of 4 percent as hydrocarbon production in oil-exporting countries levels off and demand pressures abate once the effects from the war in Ukraine normalize and fiscal policy becomes less expansionary.
- Inflation accelerated in 2025 in most CCA countries, driven by demand pressures, imported inflation mainly from Russia (primary trading partner for most economies), and reforms such as electricity tariff increases.
- Inflation outlook: projected to moderate as these effects fade and on account of generally tight monetary policy stances.
- Political developments: the peace agreement preliminarily reached between Armenia and Azerbaijan in August 2025 could enhance stability and potential economic integration, possibly spurring trade and investment across the region.

### Risks to watch
- Further geopolitical tensions related to the war in Ukraine and sanctions on Russia could threaten trade, remittances, and investment flows.
- Higher global interest rates could increase borrowing costs and worsen fiscal vulnerabilities.
- Commodity price volatility—especially in oil and gas—poses risks to fiscal revenues and external balances.
- Sanctions could put banks at regulatory risk, straining correspondent relationships and forcing them to boost compliance with stricter anti-money laundering, counterterrorism, and due diligence measures.

### Policy priorities
- Reinforce fiscal and external buffers against downside risks.
- Pursue structural reforms that:
  - improve governance,
  - reduce state dominance,
  - cut trade barriers,
  - upgrade infrastructure, and
  - strengthen regulation to better handle global trade uncertainty and harness the gains from regional integration.

### Key statistics and dates
- Real GDP growth in 2025: 5.6%
- Upward revision since May REO: 0.7 percentage point
- Medium-term estimated growth rate: 4 percent
- Notable political milestone: preliminary peace agreement between Armenia and Azerbaijan in August 2025
- Primary trading partner for most CCA economies: Russia

*IMF October 2025 Regional Economic Outlook: Middle East and Central Asia — Media Brief: Caucasus and Central Asia. IMF media contact: Mayada Ghazala (mghazala@imf.org), Communications Officer*

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_Source: https://www.imf.org/-/media/files/publications/reo/mcd-cca/2025/october/english/october-2025-reo-key-messages-cca.pdf_