Central Asian economies posted strong growth in the past year, driven by government spending, China’s reopening and its demand for Central Asian commodities, intermediated trade with, and exports to, Russia, as well as remittances and relocation of companies and individuals from Russia, according to the European Bank for Reconstruction and Development’s (EBRD) latest Regional Economic Prospects (REP) report.
As inflation receded across all countries, central banks started lowering policy rates. Continued strong growth is expected, though higher borrowing costs could weigh on investment. On the upside, recent water and energy supply disruptions may stimulate long overdue tariff reforms as a means of rationalising resource use and encouraging private sector investment,
According to the Bank, GDP growth in the region is likely to remain robust at 5.7 per cent in 2023 and 5.9 per cent in 2024.
Turkmenistan’s economy grew by 6.2% year-on-year in the first half of 2023, supported by elevated public spending, higher gas exports, and strong domestic demand. Wages increased, leading to an expansion in retail trade turnover. Agriculture and manufacturing grew on the back of import substitution policies. Fixed capital investment rose by 24.6%. Turkmenistan has recently established new air connections and increased seaport cargo operations, boosting its transit attractiveness. Supported by higher tax revenues, the government’s budget achieved a surplus of 2.3% of GDP in the first half of 2023. Fitch affirmed Turkmenistan’s “B+” rating with “Positive” outlook, citing a strong fiscal position and low public debt. The economy is forecast to grow at 6.5% in 2023 and 7.0% in 2024.
The economy of Kazakhstan is set to grow by 5.0 per cent in both 2023 and 2024, though with some uncertainty arising from oil prices. The country has seen significant expansion in sectors such as retail and wholesale trade and construction. There has also been a pick-up in public and private investment in infrastructure, transport and warehousing, reflecting Almaty’s growing role as a distribution hub serving Central Asian markets. The ongoing war on Ukraine, however, may have a negative impact on the operation of the Caspian Pipeline Consortium terminal on the Black Sea, potentially disrupting Kazakhstan’s oil exports.
The GDP of the Kyrgyz Republic is expected to grow 4.6 per cent in 2023 and 7 per cent in 2024. The country’s economic growth slowed to 2.9 per cent year on year in the first seven months of 2023 due to a contraction in metals output (mostly gold) and the agricultural sector. At the same time, the domestic textiles sector boomed thanks to strong external demand. There was also significant expansion in tourism, triggering growth in food production, hospitality, and retail and wholesale trade. The REP warns Kyrgyzstan’s outlook could be worsened by energy and water shortages as well as secondary sanctions related to Kyrgyzstan’s outsized role in intermediated trade with Russia.
The economy of Tajikistan is expected to post strong growth of 7.5 per cent in both 2023 and 2024. Stronger regional cooperation, public investment (particularly in water and energy infrastructure), the inflow of remittances from Russia and strong performance of the manufacturing and agricultural sectors are key influencing factors. A slowdown in Chinese growth and potential conflicts over transboundary water resources may negatively affect the outlook.
Uzbekistan’s GDP growth is set to reach 6.5 per cent in both 2023 and 2024, fuelled by strong domestic demand, an increase in nominal wages and credit growth. Sectors such as retail trade, construction, services and agriculture perform particularly well. Well-managed initial public offerings (IPOs) and privatisations may strengthen the outlook. Further reductions in remittances (particularly from Russia), aging infrastructure and water supply issues are among the factors that may hamper growth. ///nCa, 28 September 2023 (Based on EBRD’s press release and REP September 2023)
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