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Market Report, "Caucasus Business Forecast Report Q1 2014", published

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2013-12-12 18:32:05 - New Country Reports research report from Business Monitor International is now available from Fast Market Research

BMi ratings - Brief Methodology

Composite rating

The composite rating is an unweighted geometric mean of the short-term political and short-term economy ratings, allowing a ranking of all countries in BMI's emerging markets universe.

Political ratings

The political ratings are an indicator of political stability, seen as a pre-requisite for a stable economy and business environment. The long-term political rating considers more structural elements such as: Is there a functioning democracy? Are there free and fair elections? Is there separation between party and state? Have recent governments pursued similar, enlightened policies amid a stable political environment? The short-term political rating considers more transient influences such as: Have there been recent large-scale demonstrations or strikes? To what extent have these threatened the political status quo?

Is unemployment currently a potential source of political instability? What is the current position in the political cycle - to what extent is this contributing to political risk? Is the government having trouble passing legislation?

Full Report Details at
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Economy ratings

The economy ratings assess the degree to which the country approximates the ideal of non-inflationary growth with contained fiscal and external deficits and manageable debt ratios. The ratings use as raw material historical data and forecasts fed in from BMI's country databases: as historical data are revised and forecasts change, so the ratings change. Factors in the long-term rating include GDP growth, unemployment, inflation, real interest rates, exchange rates, the fiscal balance, the current account balance and external debt. A number of other structural factors are also thrown into the equation, including dependence on the primary sector, reliance on commodity imports, reliance on a single export sector and central bank independence. The factors included in the short-term rating are a subset of those in the long-term rating.

Business environment rating

The business environment rating is a broad indicator of the investment climate, for both domestic and foreign players. While areas such as competitiveness, finance, openness and environment comprise the bulk of the rating, there is also an important feed from the political and economy ratings. The factors considered include: the state of the national infrastructure, the education system, cronyism/ corruption, red tape, the legal framework, property rights, market access and the corporate tax regime.

Partial Table of Contents:

core Views
Major Forecast changes
Key risks to outlook
chapter 1.1: political outlook - armenia
Foreign policy
choosing Moscow over Brussels
- President serzh sarkisian's decision to have armenia join a russian-led customs union is set to halt eu plans for closer integration with the caucasian state. While the move may reduce security concerns in the short term, in the longer term it will tie armenia into russia's sphere of influence and will reduce investment opportunities from EU member states.
taBLe: arMenia - poLitica L oVerView
Long- term political outlook
Mitigation of regional tensions Key to stability
- Armenia will continue to have difficult relations with neighbours Turkey and Azerbaijan through the medium term, as a result of sensitive historical grievances and strong domestic pressure groups on both sides. Nagorno-Karabakh will remain a particular potential flashpoint given the high profile of the region and ongoing talks, which are set to test commitment to peace in both Yerevan and Baku. The heavy roop presence on both sides of the border will remain a key risk. that said, the willingness of regional heavyweights russia and turkey to support the ongoing peace process means that a 'hot war' is not inevitable. 15chapter 1.2: economic outlook - armenia
Balance of payments
Deficit Still Substantial, But Narrowing
- On the back of declining imports and a rise in exports and remittances, Armenia's current account deficit is set to narrow to 9.0% of GDP in 2013 and 7.5% in 2014. Although the deficit is set to remain substantial the central bank's FX reserves, which ticked up to US$2.4bn in september 2013 on the back of a eurobond sale, will prove more than adequate to cover the shortfall.
taBLe: arMenia - current account
chapter 1.3: 10-Year Forecast - armenia
the armenian economy to 2022
political tension Key risk to Growth
taBLe: arMenia - LonG-terM Macroecono Mic Forecasts
chapter 2.1: political outlook - azerbaijan
Domestic politics
risk of protests Following aliyev Victory
- President ilham aliyev has emerged victorious from the country's presidential election held on october 9, with preliminary estimates giving him 84.6% of the vote. We do not rule out similar protests to those seen in 2011, which called for the resignation of aliyev and snap elections, resulting in the arrest of hundreds of opposition activists during several months of unrest.
taBLe: azerBaijan - poLitica L oVerView
Long- term political outlook
everything Hinges on nagorno-Karabakh
- Attempts to win back the Nagorno-Karabakh enclave will remain the defining issue of Azerbaijani foreign and domestic policy through the medium term. no quick resolution is likely and, therefore, heightened tensions with armenia have the potential to result in further small-scale armed clashes, with escalation not ruled out.
chapter 2.2: economic outlook - azerbaijan
Monetary policy
Rate Cuts Ahead On Subdued Inflation

Full Table of Contents is available at:

About Business Monitor International

Business Monitor International (BMI) offers a comprehensive range of products and services designed to help senior executives, analysts and researchers assess and better manage operating risks, and exploit business opportunities, across 175 markets. BMI offers three main areas of expertise: Country Risk BMI's country risk and macroeconomic forecast portfolio includes weekly financial market reports, monthly regional Monitors, and in-depth quarterly Business Forecast Reports. Industry Analysis BMI covers a total of 17 industry verticals through a portfolio of services, including in-depth quarterly Country Forecast Reports. View more research from Business Monitor International at

About Fast Market Research

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