Regions and Countries

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p. 8 of 47 BACK | NEXT Developing Asia and the Pacific The global economy Newly industrialized economies Central Asian republics, Azerbaijan and Mongolia Kazakhstan Kyrgyz Republic Tajikistan Turkmenistan Uzbekistan Azerbaijan Mongolia People’s Republic of China Southeast Asia South Asia The Pacific

Central Asian Republics, Azerbaijan, and Mongolia

In 2000, the economies of the Central Asian republics (CARs), Azerbaijan and Mongolia enjoyed a strong recovery, albeit at differing paces, supported by a marked improvement in the Russian economy and strengthening of international mineral and commodity prices. Kazakhstan and Turkmenistan experienced high GDP growth rates of 9.6 and 17.6 percent, respectively in 2000, driven by large-scale oil and gas exports to Russia, still the largest market for these countries’ exports. By contrast, Uzbekistan’s growth slowed to 4.0 percent, which was a little below the government target of 4.2 percent. The main reasons for this were contraction in agriculture sector output and sluggishness in the industry sector. For the subregion as a whole, average GDP growth in 1999 was 4.7 percent, rising to about 8 percent in 2000. The higher GDP growth for 2000 was achieved with an inflation rate of 15.9 percent in 2000, nearly half its 1997 level. An important issue across the subregion is the narrow growth base—concentrated in agriculture, and oil and gas—which impedes broad-based employment creation and diversification of exports. Labor markets thus remained weak and unemployment rates high. Although inflation rates fell in most of the CARs, they remained at high levels, particularly in Tajikistan and Uzbekistan, at 24.0 and 24.9 percent, respectively. During 2000, inflation in the CARs was mainly caused by high world energy prices, drought, and excessive aggregate demand.

In 2000, the subregion continued to implement macroeconomic stabilization and poverty reduction measures. Stabilization measures included tight fiscal policy and consolidation of money supply, and foreign exchange and trade reforms. The fiscal reforms achieved mixed results mainly because of the narrow tax base, weak tax administration, and the need for new fiscal expenditures for developing infrastructure and reducing poverty.

The progress thus far in strengthening the CARs’ financial systems has been encouraging, particularly in the areas of policy and institutional reforms. However, the financial sectors remain weak points in their respective economies, particularly with regard to public confidence in financial institutions, much of which is attributed to outdated financial infrastructure. This hampers resource mobilization and results in inefficient allocation of resources. Diversifying the production base is another issue prominent on the CARs’ respective policy agendas, since sustained industrial growth and balance-of-payments stability can only be achieved with a diversified economic structure. A distinctively market-oriented economic policy regime, which provides appropriate incentives to the private sector, is crucial to sustained growth in the CAR economies. This should include privatization of state-owned enterprises as a means of providing impetus to the emergence of a competitive private sector.

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