Wednesday, April 11, 2012 -
Central Asia’s economic growth will “keep the momentum” at 6.1 percent in 2012 and 6.2 percent in 2013, a report released by the Asian Development Bank (ADB) on Thursday said.
Kazakhstan is expected to record moderate growth in 2012, due to ongoing stresses in the Eurozone which will negatively impact the Central Asian economy. However, the ADB is confident that the economy will grow at a quicker pace in 2013 once the global economy regains its strength.
Government programs to expand the economy into non-extractive sectors should bolster the economy further, while Kazakhstan’s growing integration with Russia and Belarus as part of the customs union should expand trade, the ADB said.
However, Kazakhstan’s economic growth will still be hampered by continuing struggles in the banking sector, which took a hit in the 2009 global financial crisis.
“Despite government support to the financial sector, a persistent high level of NPLs [non-performing loans] is a major concern and a key constraint to economic growth. At end-2011, banking sector performance was worse (in terms of credit-to-GDP and asset-to-GDP ratios, share of NPLs, return on assets, and return on equity) than at end-2010,” the ADB said.
In Kyrgyzstan, the economy is still in the recovery stages following 2010’s deadly ethnic violence, with all sectors witnessing growth.
“All sectors showed robust growth gains, reflecting improved security and sustained public confidence after the events of April 2010, which saw the ouster of the president and ethnic violence in the south,” the report notes.
This trend will continue to spur growth in the non-gold sector, on which Kyrgyzstan derives the bulk of its revenues. Increasing construction on infrastructure will also galvanize the economy as stronger road and rail networks will facilitate trade and development.
However, the potential accession of Kyrgyzstan to the customs union presents a real challenge for the Kyrgyz economy.
“Entry into the customs union would make the country subject to new common external tariffs, which are generally higher than those now in force in the Kyrgyz republic,” the ADB said.
“These new tariffs would raise the price, and reduce the volume, of ‘shuttle trade’ products, which consist largely of textiles reexported from the People’s Republic of China to the Russian Federation and Kazakhstan.”
The Tajik economy, while experiencing growth in several sectors, should not lean on remittances to remain afloat, the ADB report states.
“Heavy reliance on remittances and public investment as drivers of demand-driven growth alongside extremely low private investment may not be sustainable,” it said.
Economic growth was recorded in the agriculture, industry, and service sectors, but inflation doubled to 12.5 percent from 2010 to 2011 due to the rising cost of food and fuel.
The ADB predicts that Tajik economic growth will decline to 5.5 percent in 2012 before growing to 6 percent in 2013.
The biggest challenge facing the Tajik economy is the low amount of private investment and foreign direct investment.
“Serious efforts are necessary to reverse the lack of investor confidence and declining levels of private investment. Reducing risks to private investors – by providing and then enforcing property rights, for example, by reducing corruption, and by enhancing supporting infrastructure – is critical.”
Tajikistan is the poorest country in the Commonwealth of Independent States (CIS).
In Turkmenistan, increasing gas exports caused economic growth to remain in the double digits, and is likely to continue through 2012. However, the ADB stressed the importance of diversifying the economy to decrease the reliance of the state on the gas industry.
The ADB called on the Turkmen government to implement reforms to allow the economy to grow in non-hydrocarbon sectors, and create conditions where small business owners will be able to thrive.
In Uzbekistan, growth grew to 8.3 percent following strong returns in industry and services, on which the bulk of the Uzbek economy relies. Growth in 2012 is estimated to reach 8 percent, while it will decline slightly to 7.9 percent in 2013.
High remittance levels also contributed to the strong growth, the bank noted.
The biggest challenge facing Uzbek President Islam Karimov’s administration is ensuring private sector growth.
“Improving the business climate is urgently required to develop the private sector, especially for the many small businesses that represent the overwhelming share of legal entities and provide most national employment.”