(Read the full report on adb.org)
The Asian Development Bank (ADB) forecasts that countries of the South Caucasus and Central Asia will get back to growth in 2021 along with other world economies after suffering economic contraction caused by the impact of the COVID-19 pandemic.
Below are main economic indicators and forecasts for the countries of the South Caucasus region and Central Asia from the ADB’s Economic Outlook:
The economy contracted in 2020 because of the pandemic and military confrontation. Weak demand contained inflation and narrowed the current account deficit, but the fiscal response to COVID-19 notably expanded the budget deficit. With subdued investment, growth will likely be modest in 2021 before accelerating in 2022. Inflation and the current account deficit are expected to rise in 2021 before moderating in 2022. A digital transformation is essential for inclusive and sustainable growth.
After two waves of COVID-19 infections in 2020, Armenia’s transmission rate declined substantially in the first 2 months of 2021, only to start increasing again in early March. Amid heightened political uncertainty as the country heads to snap legislative elections in June 2021—and with recovery from the
pandemic taking longer than expected but most restrictions eased—growth is projected at 1.8 percent in 2021, accelerating to 3.0 percent in 2022.
Monetary policy is expected to tighten in 2021 to combat inflation, which is forecast to accelerate to 3.8 percent in 2021 because of the lagged impact of currency depreciation in 2020 and rising prices for imported oil and other commodities.
The 12-month inflation rate from December to December is expected to approach the top of the central bank target range of 2.5 percent–5.5 percent at least in 2021. Inflation could be higher if the weather proves unfavorable.
The economy contracted in 2020, squeezed by the pandemic and reduced oil production. Inflation rose slightly, and the current account slipped into deficit as lower prices and production slashed oil exports. Growth is forecast to resume in 2021 and accelerate in 2022 as the pandemic eases and demand recovers, bringing somewhat higher inflation and restoring a current account surplus with higher oil prices and output. Small and medium-sized enterprises need better access to finance.
Growth is forecast to return in 2021 at 1.9 percent and accelerate to 2.5 percent in 2022 as demand improves at home and abroad. As consumer confidence is restored and petroleum receipts become available for public investment, growth in the petroleum industry is expected to be outpaced by expansion in the rest of the economy
Inflation is forecast to accelerate to 3.5% in 2021, reflecting price increases of 10% for gasoline and 33% for diesel and a doubling of household water charges. A projected decline in domestic food prices should trim inflation in 2022 to 3.0%. Inflation could be higher if other utility tariffs are raised. The managed exchange rate regime should limit the impact of import prices on inflation.
Monetary policy is expected to focus on inflation control but still support economic recovery. Broad money is projected to rise from continued fiscal stimulus and resumed growth in credit to the private sector. The exchange rate should remain stable as a renewed trade surplus takes the pressure off the manat.
COVID-19 controls and plunging tourism slashed GDP in 2020. The gradual lifting of restrictions in 2021 should revive growth this year and accelerate it in 2022 as tourism recovers. Inflation rose in 2020 on higher prices for food and health care but is projected to slow somewhat in 2021 and 2022 as shocks recede and monetary policy tightens. Recovery in external demand and tourism should narrow the current account deficit. Transforming agriculture could boost food exports.
Growth is forecast to return at 3.5 percent in 2021 with a gradual revival in domestic demand and private consumption, then accelerate to 6.0 percent in 2022 as expected recovery in tourism and full reopening of the economy boost travel and commerce.
Inflation is projected to slow to 5.0 percent in 2021 and 3.5 percent in 2022, still above the inflation target of 3.0 percent, as monetary policy combats inflationary pressures and aims to limit lari volatility.
Prompt crisis response limited contraction in 2020, but sharp currency depreciation and supply-side constraints pushed inflation above target. Growth is projected to rebound in 2021 and 2022, assuming the pandemic continues to subside and vaccine rollout is not delayed. Inflation may be contained by monetary tightening and greater exchange rate stability. The current account deficit is forecast narrower in 2021 as oil prices rise and then wider in 2022 as domestic demand strengthens. Promoting innovation is crucial to sustainable development.
Growth is expected to reach 3.2 percent in 2021 and accelerate to 3.5 percent in 2022 as investment, hydrocarbon production, and manufacturing all increase.
Inflation is projected to decelerate slightly to 6.5 percent in 2021 and 6.2 percent in 2022 thanks to a more stable currency and the waning effect of depreciation in early 2020.
COVID-19 and related restrictions slashed growth in 2020. Inflation slowed, and the current account deficit narrowed as imports fell more than exports. Growth is projected to rebound in 2021 and 2022 with a broad recovery in industry, services, and investment. Stable tariffs for electricity and natural gas should further slow inflation, while higher exports and steady remittances should trim the current account deficit. Uzbekistan needs to make its debt management more transparent and efficient.
Growth is projected to rebound to 4.0 percent in 2021 and 5.0 percent in 2022, driven by a broad recovery in industry, services, and investment, though risks to growth persist from a protracted pandemic and uncertainty in the external sector.
Inflation is forecast to slow to 10.0 percent in 2021 and 9.0 percent in 2022, as the authorities are not expected to raise electricity or natural gas tariffs.
Economic growth in Kyrgyzstan is projected at 3.5 percent in 2021 and 5 percent in 2022, in Tajikistan – at 5 percent in 2021, 5.5 percent in 2022, in Turkmenistan – at 4.8 percent in 2021 and 4.9 percent in 2022.