Clare Nuttall in Almaty -

In 2009, Armenia was the worst affected by the economic crisis of all the CIS countries, with a GDP decrease of more than 15%. In 2010, the International Monetary Fund (IMF) forecasts a return to modest growth of 1.2%. The draft national budget for 2010 stipulates a deficit equivalent to 5.7% of GDP, as the country seeks to maintain social spending. Yerevan already raised a $500m stabilisation loan from Russia in 2009, and hopes to secure more funds from international donors to support it through 2010. On a more positive note, Armenia's banking system remained relatively resilient to the crisis due to its low integration with international capital markets. Meanwhile, Russia's RosAtomStroyExport has been selected to work with Armenia to build a new nuclear power unit, between 2012 and 2016. This will lessen Armenia's dependence on energy imports. Construction of the Russia-Armenia-Iran oil pipeline may start in 2010.

Azerbaijan is expected to be the world's fastest growing economy in 2009, according to a report from the EIU. GDP was up by 8.3% year on year in January-October - considerably lower than its growth in recent years; 34.5% in 2006, 25.0% in 2007 and 10.8% in 2008. However, the majority of this growth was centred on the oil industry. According to the Azeri government, the oil sector is expected to grow by 20.3% in 2009, while the non-oil economy will grow by just 3.2%. The government has set diversifying the economy as its priority. Azerbaijan's 2010 budget will focus on social spending, investment and defence. It is based on a conservative forecast of $45 per barrel. The government forecasts economic growth of 8.3% in the oil sector and non-oil sector growth of 4.94% in 2010.

Georgia's economy remains fragile. The rapid growth of the first part of this decade stalled after the August 2008 war with Russia over South Ossetia. Although the post-war economy was initially shored up with donor funds, 2009 saw a decline of 4% in GDP. In the first half of 2009, foreign direct investment plummeted by 80% to $226m, with the largest investments coming from the UAE, the UK and Turkey. The government forecasts 2% growth in 2010, although Prime Minister Nika Gilauri is trying to boost this figure by attracting more foreign investment. Zurab Pololikashvili was appointed as Georgia's new economic development minister in August 2009, and has said he aims to increase investment from new sources including Spain, Germany, France, India, South Korea and Japan. Pololikashvili also plans to restart Georgia's privatisation programme in 2010.

Kyrgyzstan was one of the top reformers on the World Bank's "Doing Business" survey in 2009. However, it still saw an abrupt slowdown in GDP growth from 7.6% in 2008 to an expected 1.5% in 2009, due to the knock-on effects of the crisis on its main trading partners - Russia and Kazakhstan. The IMF forecasts growth of 3% in 2010. The government has announced wide-reaching reforms that it says will further improve the business climate, but it is too early to say how effective these will be. Major reforms are also planned in the energy sector in 2010, with price hikes for heat and electricity coming into force from the start of the year. These are intended to bring utilities pricing into line with costs, and help to fund a large-scale investment programme into generation and transmission infrastructure. A key element of this is the construction of the Kambarata-2 hydroelectric power plant, which will help to ensure Kyrgyzstan's energy security. However, theses reforms are deeply unpopular among much of the population, which is used to cheap power, and there have been warnings this could lead to social unrest.

Tajikistan is expected to maintain real GDP growth of 2% in 2009, increasing to 3% in 2010, according to the IMF. Demand and prices for its two main exports - aluminium and cotton - fell in 2009, increasing the balance of payments gap. Tajikistan is also indirectly affected by international commodities prices due to its dependence on remittances from migrant workers mainly in Russia and Kazakhstan. The country's priority for 2010 is to raise money for construction of the Rogun hydropower plant. This became more urgent in December after Uzbekistan quit the Central Asian unified energy system and cut gas supplies to Tajikistan. The cash-strapped Tajik government is trying to tap both international investors and the local population to raise the $600m needed for the first phase of the project. Foreign investment remains at a low level. However, Rosatom is currently in talks with the government over the development of uranium deposits, and tenders of two major assets - the Bolshoi Konimansur silver deposit and Shakhbas gold field - are on the agenda.

Turkmenistan is set to be the biggest beneficiary of the Central Asia-China gas pipeline, which opened in December. In addition to closer relations with China - which lent it $3bn loan to fund the commercial development of the massive South Yolotan gasfield - Ashgabat is also aiming to build relations with the EU, as it seeks to lessen its dependence on Russia as its main gas export route. According to the IMF, Turkmenistan's GDP growth will drop to 4% in 2009, but is set to resume its rapid upward trajectory in 2010, when growth of 15.4% is forecast. In 2010, the country is also planning a major investment and construction programme. Money allocated to the construction sector through the state budget will be increased by 54.6% from the 2009 budget. Turkmenistan is to spend almost $12bn of state money to build 240 major new facilities in 2010. Approved projects include the north-south railway, facilities at the Avaza tourist zone, new residential and commercial real estate, shopping centres, factories and education facilities.

Largely isolated from international markets, Uzbekistan has maintained growth throughout the crisis and this is set to continue in 2010. In an attempt to encourage investment, the 2010 budget includes cuts to the base income tax rate and the single tax for micro firms and small enterprises. The government had already reduced the profit tax rate for commercial banks depending on the share of long-term investment financing in their loan portfolios in October. Several large-scale foreign investments by companies such as Gazprom, Lukoil and Petronas are also going ahead, and in November, Uzbekneftegas signed a $2.5bn agreement with Petronas and South Africa's Sasol to build a synthetic liquid fuel production plant. However, the overall business climate remains difficult, with the issue of currency convertibility a particular problem for foreign investors. According to reports from investors, since the start of the crisis it has become even more difficult to realise revenues from Uzbekistan.