DUSHANBE (TCA) — Although the external environment is expected to improve, rising domestic vulnerabilities pose a significant risk to maintaining robust economic growth in Tajikistan, the World Bank said in its latest issue of the Country Economic Update for Tajikistan.
Tajikistan’s real GDP growth rate is projected to slow down in 2017, before gradually recovering in 2018-19. However, growth will remain below 2016 levels in 2017–19, the World Bank said.
Continuing challenges in the financial sector, high state-owned enterprise contingent liability risks, and an unconducive business climate add pressures on economic growth prospects. Ongoing bank asset quality reviews may reveal additional capitalization needs, while unfavorable tax administration may potentially erode the tax base and deter new investments, the report said.
Further poverty reduction in Tajikistan will largely depend on economic recovery in Russia and domestic income growth. Continuing challenges in accessing credit by pro-poor sectors of the economy will diminish the pace of both poverty reduction and job creation in low-skilled sectors like construction and agriculture.
Despite continuing external challenges, Tajikistan’s economic output rose strongly in 2016, according to official estimates. Real GDP expanded by 6.9 percent, driven mainly by foreign-financed public and private investments.
At the same time, the protracted decline in real remittances and the depreciation of the exchange rate, in the context of an improving but still complex external environment, led to the reduction of current account deficit.
Decreased trade activity resulted in a fiscal revenue shortfall, while the exchange rate depreciation contributed to a surge in non-performing loans, reversing previous fiscal consolidation efforts and causing substantial disruption to the performance of the financial sector.
On the upside, strong growth and rising wage income pushed down the poverty rate from 32 percent in 2015 to an estimated 30.3 percent by the third quarter of 2016, driven primarily by an increase in wage incomes, the report said.