The growth forecast for the Caucasus and Central Asia has been revised upwards to 4.5% from 4.3% in 2024 and to 5.1% from 5.0% in 2025. This optimism is largely attributed to stronger-than-expected growth in Azerbaijan and the Kyrgyz Republic, among other nations in the region, ADB discloses in its Asian Development Outlook 2024 report.
Azerbaijan and Kyrgyz Republic: Growth Leaders
Azerbaijan's economy expanded by 4.3% in the first four months of 2024, driven primarily by transport and construction sectors, supported by public spending. Meanwhile, the Kyrgyz Republic recorded an impressive growth rate of 8.8% in Q1 2024, buoyed by strong output in services and construction, backed by both domestic and foreign investment.
Economic Performance in Armenia and Georgia
Other countries in the region have also demonstrated robust economic activity. Armenia achieved a growth rate of 9.2% in Q1 2024, led by the manufacturing sector. Similarly, Georgia's economy expanded by 9.0% in the first four months of 2024, with strong credit support bolstering both domestic consumption and investment.
Tajikistan and Turkmenistan: Sustained Growth
Tajikistan continued its strong growth trajectory with an 8.2% expansion in Q1 2024, partly due to a sharp rise in exports, including gold sales. Turkmenistan's growth has been driven by public investment and net gas exports, underscoring the importance of natural resources in its economic model.
Uzbekistan's Investment Surge
Uzbekistan has also shown significant economic progress, with a 6.2% growth rate in Q1 2024. This surge is largely attributed to a substantial increase in fixed capital investment, reflecting the country's ongoing efforts to modernize and expand its economic infrastructure.
Kazakhstan: Stability Amid Challenges
Kazakhstan, the largest economy in the subregion, maintained a steady growth rate of 3.7% in Q1 2024. This growth was primarily supported by the construction, manufacturing, and services sectors. The country is also focusing on reconstruction efforts following severe floods, which are expected to sustain robust growth in the construction sector. Additionally, the mining sector is anticipated to make a notable contribution to medium-term growth, particularly after the completion of the Tengiz oil field expansion project in Q2 2025.
Inflation Trends Across Central Asia
GDP Growth Rate and Inflation in Caucasus and Central Asia by Khadicha Abdurashidova
Inflation forecasts for the Caucasus and Central Asia have been revised downwards for 2024 and 2025, reflecting lower-than-expected price levels in several countries. In Armenia, a strong local currency contributed to a 0.8% deflation in the first five months of 2024, a notable decline from 5.2% inflation during the same period in 2023. Georgia's inflation was also limited to 0.9% in the same period, amid currency appreciation.
The Kyrgyz Republic saw its inflation rate drop to 4.6% in May 2024 from 11.3% a year ago, primarily due to price movements of major commodities. Similarly, inflationary pressures are subsiding in other economies. Kazakhstan's inflation rate slowed to 9.0% in the first five months of 2024, down from 18.5% in the same period in 2023, owing to a stable exchange rate and relatively tight monetary policy. Tajikistan recorded an inflation rate of 3.8% in the first four months of 2024, while Uzbekistan's inflation decelerated to 9.2% from 11.4% in the same period last year.
Monetary Policy and Future Outlook
Most central banks in the region continue to hold policy rates steady, though there is a growing trend towards easing monetary policy. For instance, the central bank of the Kyrgyz Republic cut rates twice as inflation fell to 4.5% from double digits for most of the previous year.
Overall, the economic outlook for the Caucasus and Central Asia remains positive, with growth prospects revised upwards and inflation trends showing a moderating trajectory.
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