Tajikistan Business Economy - The Times Of Central Asia

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EDB Forecasts 8.4% GDP Growth for Tajikistan in 2025

Tajikistan’s real GDP is projected to grow by 8.4% in 2025, driven by favorable trade and investment dynamics, rising gold export prices, and decreasing energy import costs, according to the Eurasian Development Bank (EDB). This optimistic forecast surpasses the Tajik government’s minimum expectation of 8.0% growth. The EDB predicts that inflation will rise to 5.9% in 2025, returning to the National Bank of Tajikistan’s (NBT) target range of 6.0% (+/- 2 percentage points) by the end of the year. Analysts attribute this inflationary uptick to strong domestic demand. In 2024, Tajikistan recorded a historic low inflation rate of 3.6% - the lowest since the country’s independence. However, a slight increase in the refinancing rate, by 1 percentage point, is expected as inflation adjusts back to the target range. The refinancing rate has remained at 9.0% since August 5, 2024. The EDB also forecasts a slight devaluation of the somoni, Tajikistan’s national currency, with the exchange rate expected to reach 11 somoni per US dollar by the end of 2025. This adjustment is attributed to higher imports and a decline in remittance volumes. Currently, the somoni trades at 10.9450 per dollar, reflecting a 0.2% appreciation against the dollar in 2024, according to data from the National Bank for Reconstruction and Development. The Times of Central Asia previously highlighted the main short-term risks for Tajikistan’s economy from 2024 to 2026, but the EDB’s projections signal a positive outlook for 2025. Key growth drivers, such as trade, investment, and favorable market conditions, are expected to bolster economic performance despite currency pressures. Despite the fact that the Government of Tajikistan claims the poverty level in the country has decreased (the poverty threshold is not specified), in reality a huge swathe of the male population is working abroad in an attempt to feed their families. Up to 40% of households in Tajikistan have at least one member working abroad. According to the World Bank-KNOMAD, migrants’ remittances to Tajikistan in 2022 amounted to 5.346 billion dollars (39.6% of the country’s GDP). This makes Tajikistan one of the most remittance-based economies in the world. This story was last updated on 10 January 2025 at 10:23GMT

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AIIB Commits $500 Million to Tajikistan’s Rogun Hydropower Project

The Beijing-based Asian Infrastructure Investment Bank (AIIB) has approved a multiphase program totaling $500 million, including an initial Phase 1 loan of $270 million, to support Tajikistan’s flagship Rogun Hydropower Plant (HPP) project. The announcement was made on January 6, following the financing approval on December 19, 2024. The Rogun HPP, located on the Vakhsh River — a tributary of the Amu Darya River — lies 110 kilometers from Dushanbe, Tajikistan’s capital. With a designed generation capacity of 3,780 MW, a 335-meter-high dam, and a reservoir spanning 170 square kilometers, the Rogun HPP is expected to deliver improved electricity access to around 10 million people. It aims to address Tajikistan’s chronic winter power shortages and position the country as a key regional energy supplier. The project is co-financed with the World Bank, with potential contributions from a global consortium of donors. It seeks to enhance the supply of clean, affordable, and climate-resilient hydropower, with the potential to export electricity to neighboring Central Asian countries. As Central Asia’s energy demand is projected to grow by 40% by 2030 and triple by 2050, the Rogun HPP will play a pivotal role in increasing reliability and reducing the cost of electricity supply across the region. Konstantin Limitovskiy, AIIB Chief Investment Officer, commented on the significance of the project, stating: "This project will significantly contribute to the green energy transition and energy security of Central Asia. Investing in sustainable energy infrastructure is not merely about meeting today’s demands, but about empowering future generations with clean, reliable power that drives transformative growth, strengthens resilience, and unlocks the full potential of the region." Tajikistan ranks eighth globally in hydropower potential, yet only about 4% of this capacity is currently utilized. The Rogun HPP is set to play a critical role in decarbonizing electricity grids across Central Asia, supporting the region’s ambitious Nationally Determined Contributions (NDCs) under the Paris Agreement.

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Central Asia Poised to Outpace Global Growth in 2025, IMF Projects (With One Exception)

The year 2025 is anticipated to bring moderate growth for the global economy, according to forecasts by the International Monetary Fund (IMF). Global GDP is projected to grow by 3.2%, reaching $115.3 trillion at current prices. While global growth is expected to remain stable, it is weaker than initially forecast. The IMF notes that the economic outlook for the United States has improved, but growth expectations for other advanced economies, particularly in Europe, have been downgraded. Emerging markets and developing economies continue to grapple with a range of challenges, including production disruptions, shipping delays, geopolitical conflicts, civil unrest, and extreme weather events. These factors have tempered growth prospects in regions such as the Middle East, Central Asia, and sub-Saharan Africa. In contrast, emerging Asia is experiencing robust growth, fueled by strong demand for semiconductors and electronics, underpinned by substantial investments in artificial intelligence. Additionally, public investment in China and India is driving regional economic expansion. However, the IMF forecasts that global growth will average 3.1% annually over the next five years, a pace slower than pre-pandemic levels. Global Economic Highlights In 2025, the United States is expected to retain its position as the world’s largest economy, with a GDP of $30.3 trillion at current prices. China will follow with $19.5 trillion, while Germany is projected to rank third at $4.9 trillion. Japan and India will occupy fourth and fifth places, with GDPs of $4.4 trillion and $4.3 trillion, respectively. Central Asia Outlook In Central Asia, Uzbekistan’s economy is forecast to expand by 5.7%, reaching $127.4 billion at current prices, according to the IMF. This growth rate positions Uzbekistan as one of the region’s fastest-growing economies. Kazakhstan, the largest economy in Central Asia, is expected to achieve 4.6% growth, with GDP reaching $306.6 billion. Kyrgyzstan’s GDP is forecast to grow by 5%, reaching $17.3 billion at current prices. Tajikistan’s economy is expected to grow by 4.5%, with GDP projected at $14.1 billion. Turkmenistan is forecast to experience slower growth, with its GDP increasing by 2.3% to reach $91.1 billion.

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Central Asia Attracted $24.8 billion in Investments in 2024

Despite global economic challenges, Central Asia has experienced growth in attracting foreign direct investment (FDI). According to the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), investment in the region increased by 27%, reaching $24.8 billion in 2024. Kazakhstan and Uzbekistan have become the main centers of attraction for capital, offering investors significant opportunities in the energy sector and green technologies. Uzbekistan attracted $4 billion in foreign investment, reflecting a 49% year-on-year decline. However, the country is actively developing sustainable environmental projects. South Korea’s Western Power plans to build a $152 million biofuel plant in Fergana region. The plant will process cotton stalks to heat greenhouses, which will replace coal and reduce emissions by 120,000 tons of CO2 over 10 years. This project reflects Uzbekistan's policy of reducing dependence on fossil fuels and introducing “green” technologies. Kazakhstan maintained its position as the regional leader in attracting investment, accounting for 63% of Central Asia's total FDI. The country increased its investment inflow by 88%, reaching $15.7 billion. An important role was played by Qatari company UCC Holding, which invested $11 billion in the construction of two gas processing plants, a compressor station, and new main gas pipelines. These projects strengthen Kazakhstan's role as a key energy hub in the region. Kyrgyzstan recorded the highest relative growth in investment, increasing by 310% to $2.1 billion. Turkmenistan and Tajikistan received $339 million and $281 million, respectively. As for outgoing investments, their volume from the region decreased by 58% to $2.3 billion. Russia remains the primary source of outgoing investments, accounting for 90% ($2.1 billion). Georgia invested $105 million, Azerbaijan $76 million, and Kazakhstan $47 million.

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Rivers Without Boundaries Coalition Criticizes Rogun HPP Plans

Rivers Without Boundaries, an international environmental organization, has released a detailed report analyzing alternative strategies for completing the Rogun Hydroelectric Power Plant (HPP) in Tajikistan. This report has been submitted for review to the World Bank Board of Directors. The report highlights the importance of exploring alternative energy development options in Tajikistan before committing to the $6.4 billion Rogun HPP project. The coalition advocates for solutions that minimize environmental and social risks while maximizing long-term benefits for the region. Environmentalists caution that even if the World Bank approves the construction of the world's tallest dam, standing at 335 meters, many of Tajikistan's pressing challenges will remain unresolved. Persistent electricity shortages, for example, are projected to continue until at least 2036, despite the project’s completion. Additionally, the project poses significant threats to the UNESCO-listed Tigrovaya Balka Nature Reserve and the endangered shovelnose sturgeon in the Vakhsh River. Agricultural disruption is another major concern, as over seven million people across Tajikistan, Uzbekistan, Turkmenistan, and Afghanistan risk losing access to vital water resources for farming. The coalition proposes an alternative approach that combines a smaller Rogun HPP with the development of solar power plants. By reducing the dam’s height by 70 meters, the plan could substantially lower economic, social, and environmental risks. This modified strategy offers several benefits, including reducing the number of displaced residents from 40,000 to roughly 13,000. Moreover, integrating solar energy into the energy mix could enable Tajikistan to meet its winter electricity demands by 2030–31 while enhancing resilience to climate change. Diversifying the energy sector would also mitigate long-term economic vulnerabilities. Previously, Rivers Without Boundaries published a report titled “Rogun Hydroelectric Power Plant Project: Non-Compliance Report with World Bank Requirements,” which detailed how the Rogun HPP project violates the World Bank’s environmental and social standards in six critical areas: environmental assessment, biodiversity protection, resource efficiency, dam safety, public participation, and forced displacement. The coalition calls on the World Bank and Tajik authorities to consider alternative solutions that align energy development with environmental sustainability and social responsibility, ensuring a balanced and equitable approach to the region’s energy needs.

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EDB Thinks Tajikistan and Kyrgyzstan Will Show Strongest Growth in 2025

The Eurasian Development Bank (EDB) forecasts that Tajikistan and Kyrgyzstan will lead regional economic growth in 2025. According to the bank’s Macroeconomic Forecast, published on November 5, GDP growth rates for Kyrgyzstan are given at 8.7%, Tajikistan at 8.4%, and Kazakhstan at 5.5%. For comparison, the corresponding figure for Russia is just 2.4%. Tajikistan’s robust growth is attributed to rising prices for gold and other export metals, coupled with reduced costs for imported energy and food products. These factors are expected to enhance economic efficiency by freeing up funds for consumption and investment. Additionally, the country’s rapidly growing population remains a central driver of its economic expansion. Similarly, Kyrgyzstan’s strong economic performance will be fueled by industrial development, high investment activity, and resilient domestic demand. However, in both Kyrgyzstan and Tajikistan, industrial growth and investment activity are anticipated to lag behind GDP expansion. Kyrgyzstan and Tajikistan are expected to grow above the global average, supported by steady exports and robust domestic demand. Kazakhstan’s economy will benefit from increased oil production, large-scale government infrastructure projects, and supportive fiscal policies. The EDB predicts that inflation across the region will gradually decline, from 7.9% in 2024 to 6.4% in 2025. High interest rates will remain a key tool in controlling inflation, with rates expected at 7.3% in Kazakhstan by the end of 2025. Inflation in Kyrgyzstan and Tajikistan is projected to remain within target levels, reaching 5.0% and 5.8%, respectively. These lower inflation rates are expected to support continued economic stability in both countries.