The World Bank’s latest “Global Economic Prospects” report issued on January 10 offers a mixed picture when it comes to the GDP growth prospects of countries across Central Asia and the Caucasus.
The report, subheaded “Weak Investment in Uncertain Times”, anticipates that the acute stage of economic shock experienced by Azerbaijan and Kazakhstan last year might be over but that the weak growth in both countries, as well as in Russia, continues to weigh on Central Asia and the South Caucasus.
It states: “Growth slowed to 0.9% in Kazakhstan and output contracted in Azerbaijan [last year]. The erosion of foreign exchange reserves in an attempt to support their currencies, following the commodity price bust, led to the abandonment of fixed exchange rates in favour of a float in Kazakhstan and a managed float in Azerbaijan. The acute phase of the shock might be over in both countries. However, activity in these countries has been held back by contractions in non-oil activity, particularly the services sector (Kazakhstan) and construction (Azerbaijan), which had previously been supported by public investment.”
Growth remained below long-term trends in Armenia, Georgia, Kyrgyzstan and Tajikistan in 2016, the report noted. Its latest estimates of real GDP in 2016 are Azerbaijan, -3.0%; Kazkhstan, 0.9%, Armenia, 2.4%; Georgia, 3.4%; Kyrgyzstan 2.2%; Mongolia, 0.1%; Tajikstan, 6.0%; Turkmenistan, 6.2% and Uzbekistan, 7.3%.
The “Global Economic Prospects” report also looked at how policy uncertainty in Europe, particularly that generated by Brexit, has considerable adverse implications for investment growth in emerging and developing economies (EMDEs), particularly in Eastern Europe and Central Asia (ECA), for which Europe is an important export market and source of finance. “A 1 standard-deviation economic policy shock in Europe could reduce investment growth by 1.5 percentage points within a year in EMDEs in ECA that are close trading partners,” the report said.
Given the difficulties of assessing the upcoming economic strategy of US President-elect Donald Trump, heightened global policy uncertainty could clearly this year coalesce around increased protectionism. The report warned. “New trade restrictions already reached a post-crisis high in 2016. Trade defence measures (anti-dumping measures, countervailing duties, and safeguards) have been the most commonly used instruments in advanced economies, while EMDEs have used a broader set of restrictive measures, including import tariffs and export taxes,” it said.
On another cautionary note, the report concluded: “In an environment of low global interest rates, concerns about bank profitability intensified in 2016, particularly in the Euro Area. Increased pressure on Euro Area banks could have international spillovers, as they play a major role in the provision of syndicated bank loans to EMDEs, especially in Eastern Europe and Central Asia, and in Latin America and the Caribbean.”
The latest 2017 real GDP growth forecast for Azerbaijan given by the World Bank is 1.2% compared to its 0.7% forecast issued in June 2016; while for Kazakhstan the new and previous forecasts are 2.2% and 1.9%, respectively; for Armenia 2.7% and 2.8%; Georgia 5.2% and 4.5%; Kyrgyzstan 3.0% and 3.1%; Mongolia 2.0% and 2.7%, Tajikstan 4.5% and 4.8%; Turkmenistan 6.5% and 5.0% and Uzbekistan 7.4% and 7.2%.
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