29th GET info event of the BMWE – Assessing the economic impact of the Iran conflict on Armenia and Georgia
What impact is the Iran conflict having on the countries of the South Caucasus? On 17 July, the German Economic Team briefed staff of the BMWE on this topic as part of its 29th information event. As part of this event series, we regularly provide insights into our current advisory work in the project countries. This time, the focus was on the economic implications of the Iran conflict for Armenia and Georgia.
The event opened with an overview of the global economic consequences of the conflict by GET Team Leader Dr Ricardo Giucci. He highlighted that the rise in global oil prices is putting upward pressure on inflation worldwide while weakening growth prospects across many economies.
Against this backdrop, the discussion focused on the transmission channels through which the conflict affects the South Caucasus and the extent to which Armenia and Georgia are exposed to these external shocks.
Dmitry Chervyakov presented the findings for Armenia. While the regional conflict creates additional uncertainty, the country’s economic growth is expected to slow only moderately. The direct impact of higher global energy prices remains limited, as natural gas imports from Russia are supplied under fixed-price arrangements. Inflation is expected to be the main transmission channel, reflecting higher fuel and import costs. Trade and transport links through Iran have so far remained operational, although firms are increasingly exploring alternative routes to mitigate risks. No significant refugee inflows or major disruptions to domestic economic activity are currently expected.
Sebastian Staske then presented the analysis for Georgia. Direct effects on economic growth are expected to remain limited, supported by strong domestic demand and robust expansion in sectors such as ICT and education. As in Armenia, fixed-price natural gas contracts cushion the impact of rising energy prices, although imports of oil products have become more expensive. Inflationary pressures are nevertheless expected to increase, mainly due to higher transport and fuel costs. Tourism remains the sector most exposed if regional instability persists, while strong underlying growth dynamics are expected to offset much of the negative economic impact.
The presentations concluded that the economic consequences of the Iran conflict appear manageable for both Armenia and Georgia. Existing energy supply arrangements and resilient domestic growth drivers provide important buffers against external shocks. At the same time, higher inflation and increased uncertainty remain key risks, particularly if the conflict persists over a longer period.
We would like to thank all participants for the constructive discussion and their lively interest.
Please check out our latest Policy Briefings and Economic Monitor for further insights into the topic: