Economic Growth - The Times Of Central Asia

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Central Asian Economies to See Continued Growth in 2024 and 2025

The latest economic outlooks from the European Bank for Reconstruction and Development (EBRD) and Asian Development Bank (ADB) project continued economic growth in the five Central Asian countries in 2024 and 2025. According to the latest edition of the EBRD’s Regional Economic Prospects report, Kazakhstan’s economy will grow by 4% in 2024, with upside from public spending to restore flood-affected infrastructure and housing. The trade, transport, warehousing, services, and IT sectors were the main growth drivers for Kazakhstan in the first half of the year. The EBRD forecasts that in 2025, the country’s real GDP will likely grow by 5.5% amid the planned expansion of the Tengiz oil field. The Asian Development Bank’s (ADB) Asian Development Outlook (ADO) September 2024 projects 3.6% growth of Kazakhstan’s gross domestic product (GDP) this year, slightly lower than the bank’s previous forecast of 3.8% in April 2024. The reason is a weaker service expansion in the first half of the year, lower oil outputs, massive spring floods, and a slowdown in investment. ADB forecasts Kazakhstan’s economic growth to accelerate to 5.1% in 2025. The government of Kazakhstan anticipates the country’s economic growth at 5.6% in 2025. The EBRD report forecasts Kyrgyzstan’s GDP growth to reach 9% in 2024 before moderating slightly to 7% in 2025. The country’s growth potential stems from the expansion of tourism, investment in infrastructure, and gold exports. Both remittances and real wages have remained elevated, helping retail and wholesale trade grow. ADB projects 6.3% growth for Kyrgyzstan in 2024 and 5.8% in 2025. Kyrgyzstan’s Ministry of Economy forecasts economic growth of 6.3% in 2024 and 6% in 2025. Kyrgyzstan’s Minister of Economy, Daniyar Amangeldiev, has explained why the economic forecasts from international financial institutions sometimes differ from those of the Kyrgyz Ministry of Economy. According to Amangeldiev, the forecasts differ because international financial organizations often do not take into account specific measures and actions that the government plans, each of which would potentially impact the country’s economic growth. He added that international forecasts can be skeptical, based on data that may not reflect all the government's actions. According to the EBRD report, Tajikistan’s GDP growth is projected to reach 8% in 2024 and 7% in 2025. Hikes in public-sector salaries, pensions, and minimum wages drove domestic demand in the year's first half, boosting the retail and wholesale trade sectors. The resumption of precious and semi-precious metal exports increased public infrastructure spending, and fixed capital investment was a major growth factor. However, fluctuations in remittances from Tajik labor migrants working in Russia present a significant downside risk for the Tajik economy. ADB forecasts Tajikistan’s economy to grow 6.5% in 2024 and 2025. The EBRD report says Turkmenistan’s economy has shown stability in recent years, citing investment in public infrastructure projects, production facilities, and fixed capital investment as key growth factors. Launching a new single window for export-import operations has improved Turkmenistan’s customs efficiency and simplified transit procedures, enabling higher freight turnover. This has led to the expansion of the country’s transportation sector. The EBRD forecasts...

EDB Upgrades Economic Growth Forecast for Most Member States

In a newly-released Macroeconomic Outlook for its six member states, the Eurasian Development Bank (EDB) reported that in 2024, Armenia’s GDP is expected to grow by 7.5%, Belarus’s by 3.4%, Kazakhstan’s by 5%, Kyrgyzstan’s by 5.5%, Russia’s by 3%, and Tajikistan’s by 8%. For most EDB member countries, the outlook has been upgraded in response to strong early year performance and continued robust utilization of domestic growth sources. EDB analysts forecast a 3.4% growth in the region’s GDP by the end of 2024. In Armenia, Kyrgyzstan, and Tajikistan, high growth rates early in the year, driven by strong domestic demand and increased exports of basic metals, have led to the following upgraded GDP growth projections for 2024: 7.5% for Armenia, 5.5% for Kyrgyzstan, and 8% for Tajikistan. Kazakhstan’s economy is expected to maintain a high GDP growth rate of around 5% in 2024. Government efforts to diversify the economy are anticipated to catalyse and sustain a steady GDP growth rate in the medium term. Russia’s GDP growth forecast for 2024 has been improved to 3%. EDB analysts note that the expansion of domestic demand has been driven by high household incomes and fiscal stimuli. However, due to tight monetary policy, it is anticipated that consumer activity will gradually decline in the coming year. Belarus’s GDP growth forecast for 2024 has been upgraded to 3.4%, supported by continued strong growth in demand from Russia and wage increases. EDB researchers forecast that inflation in Kyrgyzstan and Tajikistan may drop below target levels, while Russia and Kazakhstan continue to face increased inflationary pressures. Bank analysts project that inflation rates will gradually approach targets in 2024: 1.5% in Armenia, 6% in Belarus, 8.3% in Kazakhstan, 4.3% in Kyrgyzstan, 5.8% in Russia, and 4.1% in Tajikistan.

U.S. and Central Asia Further Trade, Economic and Investment Cooperation

The 15th meeting of the U.S.-Central Asia Trade and Investment Framework Agreement (TIFA) Council was held in Astana on 13 June. TIFA was signed in Washington in June 2004 by the United States, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan to expand international trade, attract foreign investment, and establish trade relations between Central Asian countries and Afghanistan. The US-Central Asian Trade and Investment Council was established within its framework. Reporting from Astana, the Kazakh Ministry of Trade and Integration, said that the agenda had covered prospects for diversifying trade and expanding investment cooperation. Representatives of the six countries also discussed the development of new trade routes to improve supply chain resilience and diversify the economy. During the event, Kazakh Deputy Prime Minister Serik Zhumangarin remarked, “As one of the major economies in the region and a WTO member, Kazakhstan recognizes the high potential offered by TIFA to strengthen not only bilateral but also regional trade relations. This year's meeting of the TIFA Central Asia Regional Council is further proof of the progressive development of regional cooperation and sustainability, which in turn, plays an important role in stabilizing world economy by connecting the global markets of both the West and the East.” U.S. Trade Representative Katherine Tai, emphasizing the need to coordinate joint efforts to ensure sustainable growth of TIFA economies, stated: “Central Asia remains a very important economic and strategic partner for the United States. We are also experiencing climate change and facing the consequences of technological and industrial progress. It is necessary to jointly develop traditional supply chains, the stability of which will ensure sustainable economic growth. The US is interested in improving the quality of trade, supplying critical metals for the production of cars and semiconductors.”

Alatau IT Hub Opens in Kazakhstan’s Almaty Region

The Alatau Hub, Kazakhstan's most recent regional IT hub has now opened in Konaev in the Almaty region. Supported by the Ministry of Digital Development, Innovation and Aerospace Industry of Kazakhstan, the Alatau Hub is the 14th regional IT hub launched under the management of Astana Hub. Kazakhstan is now on course to establish similar hubs in all of its regions by the end of this year. During the launch, Ersultan Ermanov, director of the Information Technology Development Department at the Ministry of Digital Development, commented: “The opening of a hub in the Almaty region is a very significant event for IT specialists in the region. Our regional hubs play a key role in creating and developing an ecosystem that stimulates the emergence of new innovative projects, expansion of business activity and technological progress. In the future, Alatau Hub will become a center of attraction for young ambitious talents. It will also contribute to the emergence of new jobs, economic growth, and increased competitiveness of the country in the international arena.” The IT hubs currently in operation across 14 of Kazakstan's regions include: Abai IT Valley, Kyzylorda Hub, Digital Jetisu, Zhambyl Hub, Oskemen IT Hub, Jaiq Hub, Turkistan IT Hub, Qostanai IT Hub, Aqtobe IT Hub, Aqmola IT Hub, Pavlodar IT Hub, Terrikon Valley, Mangystau Hub, and Alatau Hub. By the end of 2024, further hubs will open in the cities of Atyrau, Shymkent, Zhezkazgan, Petropavlovsk, and Zhanaozen.

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Central Asia as an Emerging Economic Region

Central Asia, spanning an area from the Caspian Sea in the west to China in the east and from Afghanistan in the south to Russia in the north, is rapidly emerging as a significant economic block. Comprising five post-Soviet states — Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan — this region is distinguished by its rich natural resources and strategic geographic position, as well as its natural beauty and cultural heritage. With a combined population of around 75 million people, Central Asia has emerged as a dynamically developing market that is increasingly attracting global interest. The transformation unfolding in Central Asia holds both promise and significant challenges for its residents and foreign investors alike. This shift is driven by increasing calls for political reform, the dynamism of a youthful population, and an imperative for sustainable development alongside the pressing need to diversify economic bases. Structural changes following independence in 1991 set the stage for robust growth from 2000s onward Following the collapse of the Soviet Union in 1991, Central Asian countries faced the challenge of transitioning from centrally-planned to market-oriented economies. This period was marked by significant economic difficulties across the region including negative GDP growth and hyperinflation, compounded by the complexities of privatization, legal reforms, and both social and political instability. The nations responded with different development strategies aimed at market liberalization, infrastructure improvement, and the utilization of natural resources. By 2000, Central Asia experienced a noticeable economic resurgence, marking a striking contrast to the conditions in 1991. In that year, Uzbekistan's GDP growth was at -0.5%, Kyrgyzstan at -7.9%, and Kazakhstan at -11%. A decade later, these countries reported positive growth rates of 4.2%, 5.3%, and 13.5%, respectively. This remarkable turnaround can be attributed to the "low base effect," where the initially low economic indicators set the stage for significant improvements over time. The total GDP of Central Asian countries has grown seven times since the beginning of the 2000s. In comparison with the global economic growth rate of +2.6% annually, the Central Asian region grew by an average of 6.2% between 2000 and 2023 according to IMF data. All Central Asian states are forecasted to outpace the IMF’s projected growth rate for emerging markets and developing economies 2024 which stands at 4.2%; however, actual growth will depend on reforms and foreign investment. Kazakhstan has set the highest growth goal with a five-year target GDP increase to $450 billion, which would require an achievable but challenging 6% annual growth. As illustrated below, Kazakhstan stands out as the economic powerhouse of Central Asia with a GDP almost 1.5 times that of all the other countries combined. Labor markets: Optimal demographics for growth and innovation According to United Nations data, approximately 75 million people live in Central Asia, representing 1% of the world’s population. Relative to the global median age, all of Central Asia boasts a young population. A youthful population fuels economic growth by replenishing the workforce, driving innovation, and expanding consumer markets. It supports older demographics...

USAID Launches $18 Million Program to Boost Economic Growth in Tajikistan

On 18 April, the United States Agency for International Development (USAID) launched a new initiative to support long-term economic opportunities in Tajikistan. Running for five years at a cost of $18 million, Employment and Enterprise Development Activity (EEDA) will partner local firms to improve productivity in the fields of textiles, food processing and IT through the adoption of innovative, green technologies, increased investment, and market linkages. According to a report from the U.S. Embassy in Tajikistan, the project will create 5,000 permanent jobs, assist 200 business start-ups in accessing finance, and leverage $10 million in private sector investment. In his address at the launch, USAID Tajikistan Mission Director Peter Riley stated, “It is crucial to foster innovation, drive economic growth, and create sustainable employment opportunities within the public and private entities. These partnerships underscore the shared goal of advancing Tajikistan’s economic landscape and ensuring prosperity for all stakeholders.”