Eastern Europe and the Caucasus

Armenia
Azerbaijan
Georgia
Moldova
Ukraine

Armenia country assessment 2025-26

Highlights

Macroeconomic stability strengthened in the first half of 2025. Growth is gradually returning to a more sustainable trajectory, supported by domestic demand, while inflation remained under control and reserves increased amid prudent fiscal planning and enhanced access to international markets.
Armenia’s growing partnership with the European Union (EU) is becoming an anchor for reform. The country’s EU accession law, visa liberalisation process and the New Partnership Agenda provide a promising framework for aligning governance, competition and climate standards, while Global Gateway commitments are presenting significant opportunities.
Structural reform efforts advanced across several fronts. The authorities launched an export promotion strategy, introduced legislation to support the high-tech sector and took steps to strengthen human capital development.

Key priorities for 2026

The EU approximation process should remain a priority. The EU accession law and visa liberalisation are important steps, but progress will likely be gradual given Armenia’s close economic ties with the Eurasian Economic Union and the scale of required reforms.
Armenia’s green transition and regional integration should be high on the agenda. The country’s reliance on imported natural gas highlights the need to upgrade the electricity grid and enable integration of more renewable energy sources. The regional connectivity project brokered by the United States of America in August 2025, if it materialises, could enhance Armenia’s role in regional trade and transit.
More needs to be done to promote refugee integration. Building on initial humanitarian support, policies need to focus more on long-term inclusion of refugees in society by ensuring they can access healthcare, social protection and employment opportunities more easily.

Armenia country assessment 2025-26

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Azerbaijan country assessment 2025-26

Highlights

Economic momentum has slowed in 2025. Economic growth fell from 4.1 per cent in 2024 to 1.0 per cent year on year in the first eight months of 2025. Inflation remained within the Central Bank of Azerbaijan’s target range, and fiscal and external buffers underpinned stability in the face of energy price volatility.
Deployment of renewable energy is on track. Some of the utility-scale wind and solar projects reached commissioning stage, while preparatory work on offshore wind projects continued. Transmission system upgrades aimed to enhance capacity and enable the integration of renewables.
Some progress was made in the areas of governance and connectivity. New beneficial ownership rules were introduced, along with improvements to the governance of state-owned enterprises (SOEs), the United States of America brokered a regional connectivity initiative between Azerbaijan and Armenia, and digital platforms and cybersecurity measures progressed.

Key priorities for 2026

Diversification away from hydrocarbons will remain an economic priority. Efforts should continue to boost productivity of the non-oil and non-gas private sector and increase its share in Azerbaijan’s economic output.
Azerbaijan should continue to realise its significant potential for green energy. The focus should remain on delivering the sizeable pipeline of renewable energy projects, expanding grid capacity, developing regional green energy corridors and raising energy-efficiency standards in line with the country’s decarbonisation targets.
Further improvements are needed in the business environment and labour force participation. Stronger transparency, more efficient public administration, streamlined regulations, as well as a skilful and inclusive workforce, would create more conducive conditions for private-sector growth.

Azerbaijan country assessment 2025-26

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Georgia country assessment 2025-26

Highlights

Macroeconomic performance remained strong in the first half of 2025. Real gross domestic product (GDP) grew 9.8 per cent year on year in the first quarter of 2025 and 7.3 per cent year on year in the second quarter, driven mainly by services. Inflation in the year to date has exceeded the central bank’s 3.0 per cent target.
Integration with the European Union (EU) has stalled. In 2024 the European Council concluded that the Georgian government’s actions had de facto led to a halt in the accession process. In its latest progress report, published in November 2025, the European Commission noted continued serious backsliding on the fundamentals since then, which, according to the European Commission, is “moving the country further away from its EU path”.
Reforms have advanced selectively over the past year. Infrastructure development and some regulatory-level improvements on green space stand in contrast to setbacks in the area of democratic governance.

Key priorities for 2026

A return to the EU accession track would reinvigorate reforms, improve governance and the investment climate, and strengthen economic resilience.
The independence and integrity of the justice system should become a key priority. The oppressive treatment of civil society and rule-of-law breaches have led to some EU states, the United States of America and the United Kingdom sanctioning top law-enforcement officials and judges. Recently launched investigations have exposed shortcomings in the prevention of money laundering and corruption.
Measures to accelerate the low-carbon transition and expand the skilled labour force can help sustain nimble growth. Quicker deployment of new renewable energy capacity will help the country meet its decarbonisation targets, foster investment and better position Georgia to benefit from regional energy corridors. The vocational education and training system also needs further improvement to address skills shortages in some sectors.

Georgia country assessment 2025-26

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Moldova country assessment 2025-26

Highlights

European Union (EU) support is anchoring macroeconomic stability. Sustained financial assistance from the EU under the Growth Plan for Moldova (2025-27) is mitigating immediate economic risks and supporting structural reforms consistent with Moldova’s EU accession agenda.
Gas supply disruptions are impeding growth. The cessation of gas supply from Russia’s Gazprom to the region of Transnistria has disrupted Moldova’s energy market and precipitated a pronounced rise in energy prices. EU support has facilitated the provision of subsidies to households and businesses.
Growth-oriented reforms have advanced in the past year. Recent reforms include the digitalisation of public services to foster entrepreneurship, the advancement of renewable energy initiatives and enhanced financial integration with the EU market.

Key priorities for 2026

Advancing the integration of Moldova into the EU remains of paramount importance. In the context of sustained EU assistance, it is imperative that the authorities expedite comprehensive reforms to more closely align with the EU acquis.
Energy security needs to be strengthened further. Russia’s ongoing invasion of Ukraine has disrupted Moldova’s energy supplies, underscoring the critical need to diversify the country’s energy sources. Efforts to accelerate the expansion of renewable energy capacity and to enhance energy efficiency should be maintained and intensified.
The authorities should accelerate anti-corruption reforms. While recent initiatives to consolidate anti-corruption agencies are a significant development, further efforts to improve judicial independence and strengthen the rule of law are required.

Moldova country assessment 2025-26

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Ukraine country assessment 2025-26

Highlights

Despite Russia’s continued invasion, Ukraine has maintained macroeconomic stability. Real gross domestic product (GDP) increased 0.8 per cent year on year in the first half of 2025, mainly owing to higher consumption and infrastructure investment, but growth remains hampered by labour shortages, damage to energy infrastructure and weak agricultural exports.
Inflation remains elevated but is easing gradually. Rising food and utility prices, alongside substantial wage gains, have fuelled inflation, but a prudent monetary stance by the National Bank of Ukraine (NBU) has stabilised inflationary pressures and maintained exchange-rate stability.
There has been tangible progress on European Union (EU) accession-related reforms. However, the EU is monitoring developments regarding anti-corruption and the rule of law, where reform requires renewed momentum.

Key priorities for 2026

The authorities should sustain their preparations to open the “fundamentals” cluster for EU accession. While reforms progressed in 2025, there were some challenges. Political commitment and steady implementation are essential to advancing Ukraine’s EU accession.
It is crucial to safeguard the operational independence of Ukraine’s anti-corruption bodies and ensure judicial integrity. Recent developments showed that these institutions remain vulnerable to outside influence, highlighting the need for enhanced safeguards.
The authorities should focus on preparing for streamlined, transparent reconstruction processes at all levels while supporting human capital recovery. Reforms should enhance institutional capacity and establish an accountable project planning system with clear selection criteria, regional balance and regular public reporting. At the same time, reconstruction should focus on improving livelihoods and worker reintegration for those communities most impacted by the war.

Ukraine country assessment 2025-26

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