Page 15 - GEORptDec19

IMF expects Caucasus and Central Asia to grow 4.5% y/y in 2019 and 2020
year and credit growth remains robust and supports private consumption. Exports increased by 12.4% y/y in January-August and the tourism sector remains strong despite the Russian ban on flights in force since July 2019, the EBRD argued.
On the downside, the bank underlined that the depreciation of the local currency has caused the central bank to intervene and hike the monetary policy rate in recent months. The Georgian lari depreciated by 9.4% from January to September. Inflation consequently increased from 2.6% in 2018 to 6.4% in September 2019 on the back of the depreciation and an increase in excise taxes earlier in the year.
The International Monetary Fund said on November 8 that Caucasus and Central Asia (CCA) is set to grow by an overall 4.5% in both 2019 and 2020 in spite of global trade tensions and the slowing growth of key trading partners.
The IMF urged the ex-Soviet countries to diversify their economies, improve competitiveness and use their natural advantages more effectively in order to reap gains from trade and integration into global value chains. The fund’s report covers Armenia, Azerbaijan and Georgia along with Kazakhstan, Uzbekistan, Turkmenistan, Tajikistan and Kyrgyzstan.
“Despite weaker trade, overall growth for the CCA region is expected to remain about 4.5% in 2019–20, largely owing to a looser fiscal stance and private sector credit growth,” the report said. External risks for the CCA nations include a global slowdown, trade tensions, lower commodity prices and rising geopolitical risks, the Fund noted. Domestic risks include slowing reform momentum, it noted.
Kazakhstan, Azerbaijan and Turkmenistan stand as the region’s energy exporters, whereas Armenia, Georgia, Kyrgyzstan, Tajikistan and Uzbekistan import nearly all of their oil and gas.
“Current growth rates are not bad from a global prospective, but countries should not be satisfied with this,” Juha Kahkonen, deputy director of the IMF’s Middle East and Central Asia department, told Reuters. He said a big challenge for CCA states will be job creation in the next two years.
“There is a need to diversify, make the economy more reliant on private sector activity and also the banking sector has not been reformed,” Kahkonen said, referring to Azerbaijan. He added that Azerbaijan’s private sector credit had stabilised after years of decline, but that “banks are not really in good shape to support private sector activity”.
Commenting on Kazakhstan, Kahkonen said there “needs to be a supply of bankable projects, the government needs to have policies to diversify the economy and make sure that the private sector is an engine of growth.” Kazakh banks “need to have a new business model,” he said.
The fund’s programme in the poorest CCA country, Tajikistan, is on hold for the time being as the Tajik government was not ready to commit to policies needed to support it - that includes banking sector reform, a switch to a flexible exchange rate and fiscal prudence.
15​ GEORGIA Country Report​ December 2019 ​ ​www.intellinews.com