Structural problems and prospects of innovative development of economies of countries of the South Caucasus

The aim of the article. The aim of the article is justification of prospects of further innovative development of economies of three countries of the South Caucasus.The results of the analysis. After the collapse of the Soviet Union, the South Caucasus countries have found their place in the capitalist world economy as peripheral states. However, all three states in the region have their own economic structural features and differences, both in terms of their current situation and prospects in terms of economic development. In this paper, key features and prospects of economic development are analyzed and identified. In terms of economic prospects the opportunities and challenges of participation in the South Caucasus countries and the Eurasian Customs Unions are discussesed.In the last years the South Caucasian countries showed rather high rates of economic growth, but the level of economic development of their economy is low. Economic systems of those countries are characterized with a number of structural imbalances and problems. In Azerbaijan economic growth was provided at the expense of increase of oils production and export. In Georgia and Armenia economic growth was provided at the expense of external financing that stimulated consumer demand, growth in building sector and in sectors of services.Nowadays economies of the South Caucasian countries have been practically exhausted opportunities of extensive growth. In Azerbaijan the oil boom will come to the end soon. In Armenia and Georgia quite high shortage level of the current account remains and both countries have rather big external debt. In the conditions of world economy growth deterioration, especially in Russia, volumes of foreign trade and streams of money transfers will be reduce. It will negatively affect the prospects of their economic growth.All countries of the region need some new markets and strategic investments. The Customs Union represents an attempt to make high-quality break in the integration direction. But the raw model of economy in Russia is an objective obstacle for integration of economies of the countries of region with it.Conclusions and directions of further researches. If in some ways membership in the Customs Union is favourable for Azerbaijan economy (with strong export and transit economy), it will cause damage to Georgian and Armenian economies which depend on import, for example higher tariffs will be put; countries will lose an autonomy in decision-making in questions of international trade.Participation in the Customs Union will lead to narrowing of prospects of the countries of the region in the European direction. And it can encourage the countries of region to closer integration with EU or with other semi-peripheral countries of Eurasia.