The World Bank and International Monetary Fund are predicting growth rates to slow in the coming years across Central Asia and the Caucasus. Azerbaijan is projected to be the lone state in the two regions to buck the trend and register moderate growth.

The economic disruption created by the US-Israeli blitz on Iran is a wild-card factor affecting growth projections, according to the two banks’ most recent updates, The Caspian Post reports via foreign media.

The World Bank’s Economic Update for the Europe and Central Asia region also cites geopolitical tensions and trade fragmentation as additional factors hindering economic growth. The longer the present uncertainty in the Gulf region lasts, the greater the pressure on the economies of Central Asian and Caucasian states.

“Heightened uncertainty would likely restrain investment, while weaker global demand would reduce exports,” the update states.

In the World Bank’s view, Kyrgyzstan is projected to experience the greatest dip, declining to a projected 5.8 percent rate in 2027 after achieving 11.1 percent growth last year. The average growth rate for Central Asia was 7 percent in 2025 and is estimated to slow to 5.2 percent this year and 4.7 percent the following.

The picture is similarly muddled for the Caucasus. Georgia’s economy, long the region’s top economic performer, is losing its luster: after achieving 7.5 percent growth in 2025, the rate is expected to decline to 5.5 percent by 2027. Georgia’s dip continues a downward trend over the past five years: in 2022, Tbilisi registered an 11 percent growth rate.

The bank predicts that Armenia’s economic performance will mimic Georgia’s, with the growth rate moving down from 7.2 percent last year to 5.1 in 2027.

Azerbaijan is the exception to the rule, according to the bank’s update. But that comes with a caveat: Baku at the same time is projected to have the lowest growth rate of any state in the Caucasus and Central Asia over the next two years. Azerbaijan achieved a modest growth rate of 1.4 percent in 2025. The rate is expected to rise to 2 percent in 2026 before settling back to 1.8 percent the following year.

The bank update says states in the ECA region can potentially mitigate factors impeding growth through the liberalization of private-sector business activity.

“To achieve stronger growth in productivity and jobs, ECA countries would need to prioritize ambitious structural reforms that help modernize the business environment, catalyze entrepreneurship and improve the quality of education,” the update states.

“Targeted industrial policies can help address some market failures, but they remain secondary to the transformative potential of broader structural reforms,” it adds.

The IMF’s World Economic Outlook update generally concurs with the World Bank in foreseeing a downward growth trend for the Caucasus and Central Asia over the near term, while presenting a slightly rosier view on growth rates. For example, both banks show Kazakhstan registering 6.5 percent growth last year; but the World Bank predicts Kazakhstan’s rate to be 3.9 percent in 2027, while the IMF projects 4.4 percent growth for the year. Similarly, the IMF fixes Azerbaijan’s growth rate as slightly higher (2.2 percent in 2026; 2.5 percent in 2027) than the World Bank’s projections.

The IMF update, unlike the World Bank, contains projections for Turkmenistan. The country achieved 3.6 percent growth in 2025, and the rates are expected to decline to 2.6 percent this year and 2 percent next year.

The IMF update hedges its projections, emphasizing that lots of uncertainty clouds the global economic picture.

“Downside risks dominate the outlook,” the update states. “A longer or broader conflict [in the Persian Gulf], worsening geopolitical fragmentation, a reassessment of expectations surrounding artificial-intelligence-driven productivity, or renewed trade tensions could significantly weaken growth and destabilize financial markets.”