Economic Developments - November 2018

Russia and Kazakhstan intend to bring mutual payments in national currencies up to 70% over the next 1-2 years from the current level of 63%. Bilateral trade turnover is expected to reach US$20 bln this year.

According to European Bank for Reconstruction and Development (EBRD), economic growth in Central Asia is expected to moderate in 2018 and 2019, reflecting a need for fiscal consolidation in the region, higher inflation limiting growth in real incomes and private consumption, and slower growth in the extractive sector. Regional growth would ease from 4.8 per cent in 2017 to 4.6 per cent in 2018 declining further in 2019 to 4.2 per cent. However, Kyrgyzstan, Tajikistan and Uzbekistan continued to benefit from a recovery in remittances, though they remain below pre-crisis levels of 2013-14.

In Kazakhstan, the growth rate is seen slowing to 4.0 per cent in 2018 and 3.5 per cent in 2019 from 4.1 per cent in 2017, because of slower gains from oil output. The expected substantial increase in minimum wage would underpin private consumption to some degree. Fixed investment in oil and gas sector was also likely to support economic growth.

In Uzbekistan, economic growth slightly decelerated this year, reflecting a deterioration of trade balance and slower growth in private consumption in response to price increases. While Uzbekistan's reform push lays the ground for solid growth in years to come, the price and exchange rate liberalisation and reduction of subsidies has led to adjustment of relative prices and double-digit inflation. Growth may slow somewhat from 5.3 per cent in 2017 to 5.0 per cent in 2018 and to 4.5 per cent in 2019.

Growth in Kyrgyzstan is expected to reach 3.2 per cent in 2019, marginally higher than in 2018 as non-mineral exports are expected to grow, thanks to further Eurasian Economic Union integration, and as remittances rise further.

In Tajikistan, the economy has been supported by higher fixed investment and continuing recovery in remittances. However, Tajik economy faces major fiscal challenges, a deteriorating public debt, unresolved financial sector weaknesses and significant business environment constraints. These tensions will result in less favourable economic prospects in the coming years with growth projected to slow to 6.1 per cent in 2018 and 5.0 per cent in 2019 from the official 7.1 per cent in 2017.

In Turkmenistan, growth is seen slowing in the absence of major structural reforms, to 6.2 per cent in 2018 and 5.6 per cent in 2019, compared with 6.5 per cent in 2017. Contributions to growth from public spending would be limited in light of fiscal consolidation efforts. Growth might also be dragged down by a further contraction of domestic consumption and scarcity of foreign exchange that makes it difficult to conduct business.

Earlier this year, OECD warned that Central Asia would face a challenge to achieve sustainable growth as the “commodity super cycle” was coming to an end. Commodity exports have driven the region’s strong economic performance since the 2000s. Growth has averaged 7%.

Kazakhstan has risen by 8 positions to 28th rank among 190 countries in World Bank’s Ease of Doing Business. In leapfrogging leading economies such as France, Poland, Japan, Turkey and the Netherlands, Kazakhstan secured its placed among the top 30 for the first time in the report’s history. The World Bank gave Kazakhstan credit in several areas including simplifying tax registration, social security registration and licencing, as well as streamlining the enforcement of contracts by introducing electronic court automation.

Uzbekistan initiated three business reforms in 2017-2018 and held the 76th position (74th in 2017) among 190 economies. It improved in three out of ten areas measured by Doing Business.
Kazakhstan plans to produce a total of 21,600 mt of uranium in 2018, a decrease of almost 20% compared with the previously forecast 27,000 mt. It also plans to implement similar production cuts of around 20% in 2019 and 2020.Kazakhstan is the world's largest uranium producer.

Annual gas exports from Kazakhstan to China are set to double in 2019 as Beijing moves to cushion the impact of its trade war with the U.S. Kazakhstan is expected to export 10 billion cu. meters of gas to China next year up from 5 billion cu. meters. China also wants a buffer against geopolitical instability on sea routes in Southeast Asia, which could threaten supplies of Middle Eastern LNG.

Uzbekistan and USA signed agreements worth US$2.5 billion during a visit by US Commerce Secretary to Tashkent. Representative of American-Uzbek Chamber of Commerce directly referred to Russia's growing economic ties with Uzbekistan and explicitly stated Washington's desire to compete with Moscow in that arena. During his visit, U.S. Secretary of Commerce hailed the Uzbek government's commitment to democratic reforms and called for close partnership between the world’s biggest economy and Central Asia’s most populous country.

After Uzbekistan, US Commerce Secretary traveled to neighboring Kazakhstan, where he met Kazakh President Nursultan Nazarbayev. Representatives of 16 world-class U.S. companies accompanied him to expand and explore opportunities for new commercial partnerships. This visit was a follow up to discussions held between Presidents Trump and Nazarbayev during latter’s visit to Washington DC in January, 2018. More than 150 American companies are currently in Kazakhstan. US investment in Kazakhstan totals more than US$26 billion. Bilateral trade is around US$1.5 billion.


  November 20, 2018




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About the Author

Ambassador Ashok Sajjanhar

Former Ambassador of India to Kazakhstan, Sweden and Latvia; President, Institute of Global Studies and Distinguished Fellow, Ananta Centre

Ambassador Ashok Sajjanhar belongs to the Indian Foreign Service and has acquitted his responsibilities in the diplomatic service for 34 years. He was Ambassador of India to Kazakhstan, Sweden and Latvia and has worked in senior diplomatic positions in Indian Embassies/Missions in Washington DC, Brussels, Moscow, Geneva, Tehran, Dhaka and Bangkok and also at Headquarters in India. He negotiated for India in the Uruguay Round of Multilateral Trade Negotiations and in negotiations for India-EU, India-ASEAN and India-Thailand Free Trade Agreements.

He contributed significantly to strengthening strategic ties and promoting cultural cooperation between India and USA, EU, Russia and other countries.Ambassador Sajjanhar worked as head of National Foundation for Communal Harmony to promote amity and understanding between different religions, faiths and beliefs. Ambassador Sajjanhar has been decorated by Governments of Kazakhstan and Latvia with their National Awards and by Universal Peace Federation with Title of ''Ambassador of Peace.'' Currently Ambassador Sajjanhar is President of Institute of Global Studies, New Delhi. He writes, travels and speaks extensively on issues relating to international relations, foreign policy and themes of contemporary relevance and significance. He appears widely on TV panel discussions. Ambassador Sajjanhar is interested in reading, music and travelling. His wife Madhu is an economist and an educationist. They have a son and a daughter both of who are accomplished singers. Their son passed out of Yale University and their daughter is pursuing her PhD at University of Minnesota.