EDB projects Tajikistan’s economy to rise 6.1 percent in 2021

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EDB’s Macroeconomic Forecast for 2020 says the countries in the Bank’s region of operations have been hit by major social and economic shocks this year due to the COVID-19 pandemic. The Bank forecasts its member states’ aggregate GDP to contract by 3.8% in 2020, after a growth of 1.7% the year before. Armenia’s GDP is expected to decline by 6.4%, Belarus’s 1.5%, Kazakhstan’s 3%, Kyrgyzstan’s 7.5%, and Russia’s 4%. In Tajikistan, economic growth is expected to slow down to 4.5% from 7.5% in 2019.


The EDB notes that significant social and economic support (about 3.7% of GDP) provided to Armenia should mitigate the decline in the country’s output by about 1.8-2.2% in 2020. In Belarus, Kyrgyzstan and Tajikistan, government support is relatively small (around 1.1, 2.4, and 2.5% of GDP, respectively), partly because of limited fiscal reserves.


EDB analysts believe that the pace at which the Bank’s member economies will recover from this year’s turmoil will largely depend on the future developments around the pandemic.


The review notes that the easing of social distancing measures will help to revive consumer and investment activity in the EDB region in 2021. Stronger external demand and growing commodity prices will support exports. Monetary policy is expected to remain soft in most of the Bank’s member countries next year. This will be also conducive to economic recovery.


In 2021, the economies of Armenia, Kyrgyzstan and Tajikistan will be also supported by migrant workers’ remittances. The decline in remittances in 2020 has additionally affected household incomes and domestic demand in these countries. The inflow of remittances will increase next year as economic activity in donor countries, primarily Russia, recovers.


EDB analysts point to a number of factors that will constrain economic recovery in the region. The Bank’s baseline scenario suggests that sanitary restrictions will be eased gradually, and social distancing will remain part of daily life at least for the next year. Investment growth will be weak amidst high uncertainty. Government support for the population and businesses through fiscal policies will be reduced.


The EDB projects Armenia’s economy to grow by 4.9% in 2021, Kazakhstan’s 4.4%, Kyrgyzstan’s 3.7%, Russia’s 3.2%, and Tajikistan’s 6.1%. Limited fiscal reserves, low investment demand, and the unstable financial situation in the real sector will decelerate economic recovery in Belarus.


The Macroeconomic Forecast indicates that rising oil prices and a recovery in investor interest in risk assets as the pandemic weakens will support the member countries’ currencies in 2021. High geopolitical risks will continue to exert pressure on the national currencies. In 2021, the average exchange rate of the dram to the US dollar is projected at around 492, the Belarusian rouble at 2.61, the tenge at 423.8, the som at 83.2, the Russian rouble at 74.5, and the somoni at 11.6.


The EDB expects inflation to slow down in 2021 in most countries in the region. The growth rate of the consumer price index in Armenia will decrease to 1.1% (from 1.2% at the end of 2020), in Belarus to 5.5% (from 6.4%), in Kazakhstan to 5.3% (from 7.3%), in the Kyrgyz Republic to 5.2% (from 6.5%), in Russia to 3.5% (from 4.2%), and in Tajikistan to 5.3% (from 8.5%).


The Macroeconomic Forecast also notes that, because of persistently high risks, the EDB’s projections remain shifted toward lower estimates. If the rapid increase in the infection rates cannot be quickly contained and the massive dissemination of vaccines takes more time than expected, losses in economic growth rates will be greater than in the baseline scenario.


The Eurasian Development Bank (EDB) is an international financial institution promoting integration and development in its member countries – Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia, and Tajikistan. The EDB’s charter capital totals US $7 billion. The Bank was established in January 2006 by Russia and Kazakhstan and is headquartered in Almaty. Transport infrastructure, energy, chemical, mining, and mechanical engineering projects with a high integration effect account for the main part of the EDB’s portfolio.


The Eurasian Fund for Stabilization and Development (EFSD) amounting to US$8.513 billion was formed on June 9, 2009 by the governments of the same six countries. The EFSD assists its member states in overcoming the consequences of the global financial crisis, ensuring their economic and financial stability, and fostering integration in the region. The EFSD member countries signed the Fund Management Agreement with Eurasian Development Bank giving it the role of the EFSD Resources Manager.


Source: Asia Plus