The European Bank for Reconstruction and Development (EBRD) is expecting economies of Central Asian countries Kazakhstan, the Kyrgyz Republic, Mongolia, Tajikistan, Turkmenistan and Uzbekistan to grow by 4.9% on average in 2021, according to its latest Regional Economic Prospects (REP) report, published on Thursday.
The EBRD said the region’s economy is expected to continue growing by around 4.8% in 2022 thanks to continued expansionary policies and strong external demand for key exports and labor resources.
The report notes that in 2021 growth was driven by the normalization of domestic activities following a gradual relaxation of restrictions related to COVID-19. Increased lending to businesses and households was another major factor for the growth.
Rising commodity prices benefit exporters of oil, gas and metals such as Kazakhstan, Mongolia, Turkmenistan, and, to a lesser degree, Uzbekistan. At the same time, commodity importers such as the Kyrgyz Republic and Tajikistan are seeing increased demand for migrant workers in Russia and subsequently higher remittance flows, according to the report.
The EBRD also warns that abundant liquidity is driving credit expansion and asset price inflation across the entire region. Consumer price inflation is also on the rise in all Central Asian countries except Uzbekistan fuelled by rising food and commodity prices.
Overall, the EBRD lifted this year’s growth forecast for the 37 countries in its region, but warned of several threats ahead, including rising energy costs and slow COVID-19 vaccination progress.
The EBRD estimates that a sharp recovery in the first six months of the year would lift the growth of the regions in which it invests to 5.5% in 2021. That is up from its June forecast of 4.2% and follows a contraction of 2.4% in 2020.