Two years ago, Eurasian Development Bank (EDB) published "The Economy of Central Asia: A New Perspective", highlighting economic changes in the region from 2000 to 2021. Over the course of two decades, the region's GDP increased sevenfold in nominal terms and fourfold in real terms. The average income of individuals grew by four times, mobility increased by three times, and foreign investment surged by more than 17 times. The report aimed to showcase Central Asia as a dynamic, economically attractive region.
In the past two years, these assertions have been confirmed as the region continues to demonstrate remarkable resilience to external challenges. Despite the increasing frequency and complexity of external crises, the economies of Central Asia have maintained strong growth. In 2022–2023, the region's GDP grew by an average of 4.8%, compared to a global average of 3.4%. Central Asia grew 1.4 times faster than the global economy during this period. Projections for 2024 suggest that the region's nominal GDP will exceed $500bn.
With a population of 80mn, which has grown by more than 3% over the last two years, Central Asia is opening a "demographic window of opportunity" for sustained economic growth, expected to last for the next 15–20 years. The region has evolved into a major economic player, attracting investments, serving as an important consumer market, and offering substantial transportation and transit potential. Located in the heart of Eurasia, it is now recognized as a fast-growing and strategically significant region.
However, Central Asia still faces several challenges that could affect its future growth. These include the lack of access to the sea, climate and environmental risks, and the uneven development of its water-energy complex. Addressing these challenges will require coordinated efforts among the countries of the region and the involvement of external partners. Collaborative solutions, such as coordinated water and energy development, the creation of an integrated Eurasian transport network, and the promotion of renewable energy, will not only be more effective but also cost-efficient.
In the past year, several positive changes have been made in the region’s approach to water resource management:
- The government of Kazakhstan approved the Water Resource Management Concept through 2030, aimed at implementing water-saving irrigation technologies on 150,000 hectares annually.
- A Coordination Council for Water Sector Development Partners was established, bringing together state, international financial institutions, and donor communities.
- The Islamic Development Bank committed to enhancing water use efficiency in Kazakhstan, while the first joint project involving the Eurasian Development Bank (EDB), UNDP, and Kazakhstan's Ministry of Water Resources was launched.
- Uzbekistan has initiated a series of projects aimed at saving 15 cubic kilometers of water over the next five years, with plans to increase drip irrigation coverage to 600,000 hectares, targeting a 25% improvement in water efficiency.
Moreover, Kazakhstan, Kyrgyzstan, and Uzbekistan signed an agreement to build the Kambar-Ata-1 Hydroelectric Power Station, with support from the World Bank for this cross-border public-private project.
Central Asia has the potential to achieve sustainable long-term growth. Key drivers will include continued efforts on water management, infrastructure development, human capital investments, and the green light for private capital. Additionally, strategic infrastructure investments and accelerated industrial development are essential.
Global Economic Trends and Implications for Central Asia
The global economic landscape is experiencing slower growth despite the reduction in interest rates in developed countries. While lower rates are expected to drive growth, structural limitations suggest a deceleration in global economic activity. These limitations include:
- A slowdown in productivity growth, exacerbated by rising wages, which began during the pandemic and has continued as workers reassess the value of their time.
- A shift in labor resources to less productive sectors such as trade, tourism, hospitality, and public catering, which has impacted overall productivity growth.
- The global trade slowdown: Since 2012, global trade growth has lagged behind GDP growth, with fragmentation in the global economy further deepening this trend. The Eurozone and Japan are among the most vulnerable to this shift.
Despite these global challenges, economic dynamics in major economies will be mixed. The U.S. GDP growth is expected to slow to 1.6% by 2025, while the Eurozone is anticipated to experience a gradual recovery, with GDP growth of 1.1% in 2025. China's economy is expected to accelerate, growing by 5% in 2025, driven by large-scale fiscal stimulus and eased monetary policies. However, structural changes needed to support internal consumption may limit China’s medium-term growth.
Slower global growth will have a mixed impact on commodity markets. Oil prices are expected to decrease due to higher supply and weaker demand, while food prices may rise after a significant drop in 2023–2024.
For Central Asia, 2024 is expected to be a landmark year, with GDP growth projected to exceed 4%, surpassing the global average and marking the highest growth rate in the past 12 years, excluding post-pandemic recovery. The region’s growth will continue to outpace the world economy for the second consecutive year, with projections for 2025 suggesting a slowdown to around 3%.
In 2025, internal drivers such as government initiatives focused on major infrastructure and social projects, as well as investment growth, will continue to be key contributors to the region's economic expansion.
Inflation and Currency Trends
Inflation in the region is expected to average 6.4% in 2025, with gradual stabilization toward target levels. In Russia and Kazakhstan, price growth will slow due to high interest rates, while Armenia, Kyrgyzstan, and Tajikistan are expected to maintain inflation within their target ranges. Specific projections for 2025 include:
Exchange rate fluctuations in Central Asia will be moderate. The Armenian dram is expected to depreciate by 2.6% in 2025, with a forecasted average rate of 402 drams per U.S. dollar. The impact of increased imports and rising domestic demand will play a role in the exchange rate dynamics, although sustained remittance inflows and tourism activity will provide support for the national currency.
Central Asia is poised for continued growth, driven by internal economic reforms, strategic investments, and strong regional collaboration. The focus on managing water resources, improving infrastructure, and fostering human capital will position the region for sustained prosperity in the years ahead.
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