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International Monetary Fund
IMF Survey Magazine: Countries & Regions
REGIONAL ECONOMIC OUTLOOK
Caucasus, Central Asia Feel Crisis Impact, But Set for Modest Upturn
IMF Survey online
October 3, 2009
The global crisis has severely impacted the Caucasus and Central Asia
(CCA), with growth for the region projected to drop from 6.6 percent
in 2008 to 1.5 percent in 2009, IMF Middle East and Central Asia
Department Director Masood Ahmed said.
Ahmed told a press conference in Istanbul that CCA policymakers have
responded to the downturn by easing fiscal and monetary policies and
strengthening social safety nets. The international community has also
provided assistance to the region. For some countries, however,
additional donor support will be needed to contain the adverse impact
of the crisis, he said.
`The region as a whole should see a modest recovery in 2010, although
the energy importing low-income countries in the region still face a
difficult year ahead,' said Ahmed, speaking ahead of the IMF-World
Bank Annual Meetings.
Solid growth for energy exporters
CCA countries differ substantially in terms of per capita GDP, which
ranges from US$795 in Tajikistan to US$8,500 in Kazakhstan. Half of
the region's countries are exporters of gas and oil (Azerbaijan,
Kazakhstan, Turkmenistan, and Uzbekistan), while the others are
importers (Armenia, Georgia, the Kyrgyz Republic, and
Tajikistan). This key difference largely accounts for the disparity in
the outlook across countries.
Most CCA energy exporters have weathered the global downturn
reasonably well and are projected to record solid growth in 2009,
owing to long-term energy export contracts, supportive policies, and
in some cases limited linkages to international markets. One exception
is Kazakhstan
ell as being hit by lower oil prices, and is likely to see GDP
contract by about 2 percent in 2009, with recovery in 2010 held back
by lingering problems in the banking system.
In contrast, Azerbaijan, Turkmenistan, and Uzbekistan are projected to
register robust growth in 2009, supported mainly by public spending
made possible by ample public savings accumulated during the boom
years. With global energy demand increasing again, these countries are
expected to grow strongly in 2010, according to IMF projections.
Energy importers face worsening living standards
The region's four energy importers, on the other hand, are facing a
marked slowdown in growth and deteriorating living standards mainly as
a result of a sharp drop in remittances (Charts 1 and 2) from Russia,
which is also in recession and has had to shed jobs previously filled
by CCA workers.
These countries are being hit to varying degrees. Armenia, which
experienced a strong construction boom and exceptionally fast growth
in recent years, is likely to suffer a contraction of more than 15
percent in 2009. Georgia has also been seriously hit by the slowdown
in foreign direct investment that had fueled its growth in recent
years. In contrast, the Kyrgyz Republic and Tajikistan are faring
better, helped by bumper harvests.
Donors, including neighboring Russia and China and the World Bank,
have stepped in to help CCA's energy importers weather the crisis. The
IMF is providing assistance through the concessional Poverty Reduction
and Growth Facility (in the case of Tajikistan) and under the IMF's
Exogenous Shocks Facility (the Kyrgyz Republic). Armenia and Georgia
both have IMF Stand-By Arrangements.
`Official support is critical in helping the countries implement
counter cyclical fiscal policies to tide them over the crisis,' Ahmed
stressed, noting that this support should help bring about a gradual
recovery for CCA's energy importers in 2010.
Policy response
Governments and central banks in the region have responded to the
impact of the g
ssible, CCA countries should continue to pursue fiscal policies that
support growth and keep social protection a priority, the IMF
says. The energy importers will need additional donor support on
concessional terms to prevent a buildup of unsustainable debt levels,
while the energy exporters should use part of their anticipated uptake
in revenue from rising energy prices to push ahead their structural
reforms agenda.
Because financial sectors across the region are under stress, notably
in Kazakhstan, restoring financial health remains a priority. The
region's vulnerabilities in this sector call for close monitoring of
CCA financial systems as well as enhanced supervision and crisis
preparedness.
The IMF also recommends that countries in the region continue to
preserve exchange rate flexibility or move towards flexible exchange
rate regimes over time to maintain competitiveness and discourage
speculative capital flows.
The IMF will release a detailed forecast, Regional Economic Outlook:
Middle East and Central Asia, on October 11.
Comments on this article should be sent to [email protected]
IMF Survey Magazine: Countries & Regions
REGIONAL ECONOMIC OUTLOOK
Caucasus, Central Asia Feel Crisis Impact, But Set for Modest Upturn
IMF Survey online
October 3, 2009
The global crisis has severely impacted the Caucasus and Central Asia
(CCA), with growth for the region projected to drop from 6.6 percent
in 2008 to 1.5 percent in 2009, IMF Middle East and Central Asia
Department Director Masood Ahmed said.
Ahmed told a press conference in Istanbul that CCA policymakers have
responded to the downturn by easing fiscal and monetary policies and
strengthening social safety nets. The international community has also
provided assistance to the region. For some countries, however,
additional donor support will be needed to contain the adverse impact
of the crisis, he said.
`The region as a whole should see a modest recovery in 2010, although
the energy importing low-income countries in the region still face a
difficult year ahead,' said Ahmed, speaking ahead of the IMF-World
Bank Annual Meetings.
Solid growth for energy exporters
CCA countries differ substantially in terms of per capita GDP, which
ranges from US$795 in Tajikistan to US$8,500 in Kazakhstan. Half of
the region's countries are exporters of gas and oil (Azerbaijan,
Kazakhstan, Turkmenistan, and Uzbekistan), while the others are
importers (Armenia, Georgia, the Kyrgyz Republic, and
Tajikistan). This key difference largely accounts for the disparity in
the outlook across countries.
Most CCA energy exporters have weathered the global downturn
reasonably well and are projected to record solid growth in 2009,
owing to long-term energy export contracts, supportive policies, and
in some cases limited linkages to international markets. One exception
is Kazakhstan
ell as being hit by lower oil prices, and is likely to see GDP
contract by about 2 percent in 2009, with recovery in 2010 held back
by lingering problems in the banking system.
In contrast, Azerbaijan, Turkmenistan, and Uzbekistan are projected to
register robust growth in 2009, supported mainly by public spending
made possible by ample public savings accumulated during the boom
years. With global energy demand increasing again, these countries are
expected to grow strongly in 2010, according to IMF projections.
Energy importers face worsening living standards
The region's four energy importers, on the other hand, are facing a
marked slowdown in growth and deteriorating living standards mainly as
a result of a sharp drop in remittances (Charts 1 and 2) from Russia,
which is also in recession and has had to shed jobs previously filled
by CCA workers.
These countries are being hit to varying degrees. Armenia, which
experienced a strong construction boom and exceptionally fast growth
in recent years, is likely to suffer a contraction of more than 15
percent in 2009. Georgia has also been seriously hit by the slowdown
in foreign direct investment that had fueled its growth in recent
years. In contrast, the Kyrgyz Republic and Tajikistan are faring
better, helped by bumper harvests.
Donors, including neighboring Russia and China and the World Bank,
have stepped in to help CCA's energy importers weather the crisis. The
IMF is providing assistance through the concessional Poverty Reduction
and Growth Facility (in the case of Tajikistan) and under the IMF's
Exogenous Shocks Facility (the Kyrgyz Republic). Armenia and Georgia
both have IMF Stand-By Arrangements.
`Official support is critical in helping the countries implement
counter cyclical fiscal policies to tide them over the crisis,' Ahmed
stressed, noting that this support should help bring about a gradual
recovery for CCA's energy importers in 2010.
Policy response
Governments and central banks in the region have responded to the
impact of the g
ssible, CCA countries should continue to pursue fiscal policies that
support growth and keep social protection a priority, the IMF
says. The energy importers will need additional donor support on
concessional terms to prevent a buildup of unsustainable debt levels,
while the energy exporters should use part of their anticipated uptake
in revenue from rising energy prices to push ahead their structural
reforms agenda.
Because financial sectors across the region are under stress, notably
in Kazakhstan, restoring financial health remains a priority. The
region's vulnerabilities in this sector call for close monitoring of
CCA financial systems as well as enhanced supervision and crisis
preparedness.
The IMF also recommends that countries in the region continue to
preserve exchange rate flexibility or move towards flexible exchange
rate regimes over time to maintain competitiveness and discourage
speculative capital flows.
The IMF will release a detailed forecast, Regional Economic Outlook:
Middle East and Central Asia, on October 11.
Comments on this article should be sent to [email protected]