Central Asia in the Last Economic Prospects of the World Bank
Wednesday 16 January 2013
WASHINGTON (World Bank) – The World Bank’s twice-yearly Global Economic Prospects examines growth trends for the global economy and how they affect developing countries. The reports include three-year forecasts for the global economy and long-term global scenarios which look ten years into the future. Topical annexes in this online publication cover financial markets, trade, commodities, and inflation.
- Global Economic Prospects, January 2013 (PDF)
Four years after the onset of the global financial crisis, the world economy continues to struggle. Developing economies are still the main driver of global growth, but their output has slowed compared with the pre-crisis period. To regain pre-crisis growth rates, developing countries must once again emphasize internal productivity-enhancing policies. While headwinds from restructuring and fiscal consolidation will persist in high-income countries, they should become less intense allowing for a slow acceleration in growth over the next several years.
In its last issue of January 2013, the World Bank provides some valuable indications about the growth expectation in Central Asian countries.
Foreign direct investment (FDI) inflows account for 32.6% of gross fixed investment during 2009 and 2011 in Kazakhstan.
Remittances are an important source of both foreign currency and domestic incomes for several countries in Central Asia region. They represent more than 20% of GDP in Kyrgyz Republic and about 45% in Tajikistan. Remittances flows from Russia, which account for 30% of the inflows to the region, benefited from high oil prices. As a result, total inflows to Armenia, Georgia, Kyrgyz Republic, Moldova and Tajikistan are estimated to have grown in 2012.
After easing slightly in the first half of the year, inflation in the region has gained momentum in recent months, reflecting increased food prices following weak crops in Russia, Ukraine and Kazakhstan, as well as supply constraints and increased taxes and administrative tariffs. The uptick in inflation will likely weigh on consumption, particularly if food prices continue to rise, and will leave less room for monetary policy to support the growth if conditions deteriorate.
Kazakhstan is projected to slowdown in 2012 due to capacity constraints and the drought affecting the wheat production and expected to pick up only by 2014 after a new oilfield becomes operational.
For the commodity exporters, the key challenge continues to be high dependence on extractive industries. Most of them are bumping against capacity constraints, and while current exploration and investments should result in increased production over the forecast period, both the pace of income (commodity prices are projected to decline in real terms) and output growth is likely to be significantly slower than in the recent past. While the extractive sectors will remain important sources of income, for the policy must focus on establishing the conditions under which other sectors of the economy can prosper and expand. Here, World Bank has no easy answers, but thinks improving the predictability and enforcement of laws, reducing administrative burdens and hurdles and investing in both infrastructure and human capital are important components of any lasting effort to diversify and reducing dependence on commodity-related earnings.
Non-performing loans (NPL) remain at an already very high level at 37% in Kazakhstan. The high levels of NPL in region’s banking system may further constrain credit growth going forward, which has already slowed down considerably.