"The recent military conflict between Azerbaijan and Armenia poses downside risks to the economy, however, Georgia’s direct exposure is much more limited than what might be expected on the economic interdependence in the immediate neighborhood.
As of Q2 2020 inflows of Exports, tourism, remittances and FDI stood at around 3.4% of GDP. Furthermore, Georgia's exports to neighboring countries are mostly composed of re-exports, having lower domestic value added. Despite limited direct exposure, indirect effects of the conflict may be more significant if the tensions continue for a prolonged period and/or escalates further," the TBC Capital Weekly Bulletin reads.
It is noteworthy that Georgia has temporarily suspended military cargo transports to Azerbaijan and Armenia. Additionally, economists have praised PM Gakharia's move to offer the conflicting parties to hold negotiations in Tbilisi, for they have defined this as an investment incentive.
Armenia-Azerbaijan clashes negatively impacted remittances from Armenia only, while they have shown a sustained increasing trend from Azerbaijan.
The majority of specialist unanimously admit that the military conflict between the two countries will deal a blow to the region's economy, and the longer it lasts the worse outcome it will produce. It will negatively affect Georgia's and the region's investments, tourism and trade. However, some experts claim that the effect of the Nagorno-Karabakh conflict on Georgia will be insubstantial.
On 27 September, tensions rose on Armenia-Azerbaijan border and have not been diffused so far. Military clashes and casualties have been reported.
The two countries also clashed in the region earlier on 12 July, with the conflict lasting for ten days.
