Central Asia faces a bleak economic outlook and policy-makers should prepare for the long haul as the shocks buffeting the region are likely to be enduring, the International Monetary Fund has said.
In Central Asia, “the situation and outlook are worse than for the world economy as a whole,” Juha Kahkonen, deputy director of the IMF’s Middle East and Central Asia Department, said at a briefing in Almaty on October 23. “This is because the region has been hit by three major external shocks.”
The IMF identifies the wave of external shocks as the fall in global prices for the commodities that Central Asia exports, which range from oil and gas to metals, repercussions from the recession-hit Russian economy, which the IMF expects to contract by 3.8 percent this year, and the shifts in major global exchange rates pressuring regional currencies.
Added to all those woes is the slowdown in China, a major trading partner and investor for the Central Asian states.
The IMF says that as a result, the region will experience slower growth than it has become accustomed to in recent years.
Kazakhstan — which is suffering from low oil and metals prices and struggling with pressure on its currency that has seen the tenge lose around half of its value since the central bank moved to a free float in August — is expected to see growth of just 1.5 percent this year, according to both IMF and government forecasts. That is down from 4.3 percent last year.
Tajikistan and Kyrgyzstan will fare slightly better, expanding by 3 percent and 2 percent respectively, according to the IMF’s forecasts. However, that is far slower than the growth posted by Dushanbe and Bishkek last year, at 6.7 percent and 3.6 percent respectively.
Turkmenistan and Uzbekistan appear to be bucking the trend, with the IMF forecasting growth of 8.5 percent for the former and 6.8 percent for the latter.
Many economists believe that with a paucity of reliable statistics available on these two countries, their real growth prospects are difficult to gauge.
Kahkonen said growth in both countries is driven by gas exports to China and strong public investment programs.
Tashkent says its economy grew by 8 percent in the first nine months of this year, but there are plenty of signs of economic troubles — from falling remittances from labor migrants in Russia, which Russia’s central bank says dropped by nearly half in the first half of the year, to the currency’s plunge on the black market, where the sum reached an all-time low of 6,000 to the dollar on October 22. The currency has lost more than two-thirds of its value since the the start of the year.
The IMF urged regional governments to carry out reforms in order to prepare for enduring economic troubles.
“The long-lasting nature of the shocks means that deeper and more durable policy changes will be needed,” Kahkonen said. “Structural reforms would help move these countries to a higher growth path.”