Economic growth in the Caucasus and Central Asian region will weaken this year as lower commodity prices and wide-ranging spillovers from Russia’s recession continue to take its toll. Yet, the slowdown will be milder than previously expected, the International Monetary Fund (IMF) said in the latest edition of its World Economic Outlook published on October 4.
The economic outlook for the region improved from IMF’s previous report in April, mainly reflecting the firming in oil prices along with better expectations for the Russian economy. “The somewhat improved outlook for Russia is expected to support activity elsewhere in the region, especially in oil importers, given linkages through trade and remittances,” the IMF says. Growth in the region is expected to ease to 1.3% this year from 3.2% in 2015. The forecast was raised from a 1.2% growth expected in April.
Among oil exporters, the economies of Azerbaijan and Kazakhstan are projected to contract in 2016 amid a drop in export revenues, with the Azeri economy shrinking by 2.4% and that of Kazakhstan by about 0.8%. Both estimates, however, represent an improvement on IMF’s April forecasts that pitched Azeri contraction at 3%, while Kazakh growth was seen at just 0.1%.
“Growth in these countries is projected to rise gradually, supported by increased hydrocarbon production in Kazakhstan and non-hydrocarbon activities in Azerbaijan, as well as some recovery in oil prices and more competitive currencies,” the analysts suggest. Azerbaijan’s economy is expected to return to a 1.4% growth in 2017, while the Central Asia’s largest economy will manage a growth of just 0.6% next year.
Uzbekistan and Tajikistan will be the fastest expanding Eurasian economies in 2016, with growth in both countries projected at 6%. The outlook for the Uzbek economy was raised from a 5% expansion expected in April, while the Tajik forecast was improved from 3%.
Turkmen growth is projected to weaken to 5.4% in 2016 from 6.5% in 2015, the IMF said, raising its forecast from 4.3% expected in April. Next year’s growth estimate was upgraded to 5.4% from 4.5%.
Kyrgyzstan stands out as the only country in the region for which the IMF is cutting its forecasts. Kyrgyz growth estimate was lowered to 2.2% from 3.5% for 2016 and to 2.3% from 2.7% for 2017.
The smaller Caucasus countries – Armenia and Georgia – will also expand at a faster than previously expected rate both this year and next. Armenia’s GDP growth forecast for 2016 was revised up to 3.2% from 1.9%. Growth should accelerate to 3.1% in 2017, a 0.9 percentage points upgrade on IMF’s April forecast.
The growth of the Georgian economy is forecast to speed up to 3.4% in 2016 from 2.8% last year and further to 5.2% in 2017. Both estimates were hiked by 0.9pp and 0.7pp, respectively.
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