The European Bank for Reconstruction and Development (EBRD) forecasts a strong economic performance across Central Asia, as per their latest Regional Economic Prospects (REP) report published on Wednesday. The economies of the region demonstrated significant growth in the first half of 2023, bolstered by a resurgence of international trade and tourism, along with high levels of migration and remittances from Russia. The GDP growth in the region is expected to remain robust at 5.7% in 2023 and 5.9% in 2024.
Each country within the region has its unique set of factors contributing to the predicted growth. Kazakhstan's economy is set to grow by 5.0% in both 2023 and 2024, driven by significant expansion in sectors such as retail and wholesale trade and construction. However, uncertainty looms due to fluctuating oil prices and potential disruptions to the country's oil exports due to the ongoing war on Ukraine.
In contrast, Kyrgyzstan's economic growth slowed due to a contraction in metals output and the agricultural sector but is expected to rebound with a projected growth of 4.6% in 2023 and 7% in 2024. Mongolia's economy is likely to grow by 7.2% in 2023 and 7.5% in 2024, driven by China's demand for its commodities and the recovery of its tourism sector.
Tajikistan's economy is expected to post strong growth of 7.5% in both 2023 and 2024, influenced by stronger regional cooperation, public investment, inflow of remittances from Russia, and strong performance of manufacturing and agricultural sectors. Uzbekistan’s GDP growth is set to reach 6.5% in both years, fueled by strong domestic demand, an increase in nominal wages, credit growth, and strong performance in sectors such as retail trade, construction, services, and agriculture.
However, potential challenges could affect the scale and appetite for investment in the region. These include higher borrowing costs, recent water and energy supply disruptions, which may prompt overdue tariff reforms and better resource management. In addition, the tightening of global credit conditions and a slowdown in China are among the main downside risks for Mongolia.
The EBRD's overall forecast for its regions indicates a slowdown to 2.4% in 2023 from 3.3% in 2022. However, growth is expected to pick up to 3.2% in 2024 as inflation continues to ease. EBRD Chief Economist Beata Javorcik noted a diverging pattern of growth among the EBRD regions, with Central Asia showing robust growth compared to weaker performance in central Europe and the Baltic states.
In other news, the EBRD revised its yearly GDP growth projection for Türkiye to 3.5% from its May forecast of 2.5%. The revision reflects strong growth in the first half of the year, driven by pre-election fiscal stimulus. Türkiye was able to secure investments from Gulf countries amounting to $50 billion in various sectors. The country's Medium-Term Program released earlier this month was received positively by investors, signaling a return of foreign investors and helping rebuild the country's reserves.
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