CENTRAL ASIA’S RAPID GROWTH TO CONTINUE IN 2006-2007, SAYS ADB
Journal of Turkish Weekly
April 6 2006
Central Asia will maintain its rapid economic expansion with GDP growth
in the region projected at 10.3% in 2006 and 9.8% in 2007, according
to a major ADB report released today. The region grew 10.9% in 2005.
Regional inflation is expected to rise slightly to about 7.9% in 2006,
but the current account is now expected to post a strong surplus due
to high oil prices.
“Many Central Asian economies are benefiting from a range of reform
measures under way. But the overall picture masks a large gap between
growth in the oil-producing nations and the rest,” said ADB Chief
Economist Ifzal Ali in launching the 2006 edition of ADB’s flagship
annual economic publication, Asian Development Outlook (ADO).
“As a region, Central Asia would benefit most from an aggressive
campaign to remove barriers to trade and foster closer economic
cooperation,” he said.
ADO 2006 forecasts overall growth for the 43 countries of developing
Asia of 7.2% in 2006 and 7% in 2007.
In Armenia, rapidly rising incomes and falling poverty rates
abetted by well-sequenced economic reforms are the country’s current
hallmarks. GDP growth is forecast between 6% and 7% in 2006-2007 as
inflation is expected to be well contained, and the current account
deficit is expected to narrow further. The medium-term outlook is
favorable although prospects would brighten if an agreement to resolve
the conflict over Nagorno-Karabakh was concluded and the country’s
borders were fully open to trade.
Azerbaijan experienced unprecedented GDP growth of 26.4% in 2005.
This momentum is set to build further to 30.5% in 2006 and nearly that
rate in 2007, driven by oil and gas production and exports as recent
large investments come fully online. The 2006 budget calls for a very
large increase in spending and the Government will need to carefully
manage expenditure to avoid stoking inflation, which started to pick
up last year. Key challenges are controlling inflation, preventing
excessive appreciation of the Azerbaijani manat, and diversifying
the economic base.
Ambitious structural changes, foreign investment, high prices for
hydrocarbons, and political stability have spurred Kazakhstan’s
economy and improved living standards in recent years. GDP growth is
projected to average 8.5% in 2006-2007 as high investment continues
in this oil-driven economy. The challenge ahead is to maintain
past successes and ensure broad-based development and employment by
expanding non-oil manufacturing, raising productivity in agriculture,
and extending the reach of small and medium-sized enterprises.
In the Kyrgyz Republic the “Tulip Revolution” and the fall in gold
production at the country’s major mine adversely affected the economy
in 2005. The outlook is for recovery and GDP growth is projected at
5% in 2006 and 5.5% in 2007 based on implementation of an economic
program supported by the Poverty Reduction and Growth facility of
the IMF. The new Government has declared its commitment to addressing
the three main challenges facing the country: low living standards,
unemployment, and widespread corruption.
GDP growth in Tajikistan slowed to 6.7% in 2005 due mainly to falling
cotton production and deterioration in the terms of trade. The
outlook is for a recovery in activity with GDP growth projected at 8%
in 2006 and then moderating to 6% in 2007. Progress has been made
in implementing a poverty reduction and growth strategy in recent
years, despite the legacy of weak institutional capacity and a limited
resource base. Medium-term economic prospects are promising in view of
the start of major foreign-invested projects and intensified efforts
to advance structural reforms.
The outlook for growth in Turkmenistan is subject to considerable
uncertainty because of the economy’s heavy reliance on exports of a
handful of energy and agricultural products. If prices for exports
of natural gas rise in 2006 this will provide a short-term stimulus
to the economy and GDP should grow 5%-7% a year in 2006-2007.
Uzbekistan has posted strong growth over the past two years with
significant contributions from agriculture and robust performance
on external trade. This growth momentum is expected to continue in
2006-2007 with GDP projected to expand about 6% annually, aided by
greater foreign direct investment in the hydrocarbon sector.
Medium-term prospects are bright; however, a sustained, broad-based
high-growth track would require undertaking the critical mass of
reforms needed for private sector-led growth.