Growth remained robust at 7.4% in 2013, supported mainly by remittances. It is expected to slow to 6.0% in 2014 and 5.8% in 2015 because of anticipated declines in the production of aluminum and cotton, Tajikistan’s primary exports. The main policy challenge is to boost private investment by improving governance and the investment climate.

Economic performance

Growth remained robust at 7.4%, though slightly lower than the 7.5% recorded in 2012. It was driven by strong domestic demand attributable to higher remittances, booming construction, and increased public investment. Private investment expanded but remained barely half the size of public investment.

On the supply side, growth in industry slowed to 3.9% from 10.4% in 2012, reflecting an 18.9% contraction in aluminum production caused by aging technology, disruptions in the supply of raw materials, and the lowest global prices since 2009. Industry nevertheless expanded because of higher output from mining, food processing, and electricity generation and distribution. Growth in agriculture also slowed, to 7.6% from 10.4% in 2012, as a 6.0% decline in cotton production linked to lower international prices offset major gains in newer crops. Growth in services accelerated to 19.3% from 14.5% in 2012, fueled by high remittances, while a recovery in public investment helped boost construction by 18.2%, sharply reversing an 18.9% contraction in 2012.

On the demand side, consumption remained the main driver of growth, supported by strong remittances and increased public consumption as spending on social services rose. Public investment expanded by 2.2%, reversing the 3.5% contraction in 2012 with renewed government spending in infrastructure projects, mainly for transport and energy. Private investment expanded by 1.2%, up from 1.0% in 2012. Recent reforms to improve the investment climate, particularly in tax policy and administration, are gradually paying off. However, excessive regulation, problems with governance, and limited property rights hinder the expansion of private investment and wages.

Selected Economic Indicators (%) - Tajikistan 2014 2015
GDP Growth 6.0 5.8
Inflation 5.5 6.0
Current Account Balance (share of GDP) -2.1 -2.3

Source: ADB estimates.

Economic prospects

Growth is forecast to slow to 6.0% in 2014 and 5.8% in 2015, as aluminum and cotton output both decline. Nevertheless, the overall outlook remains cautiously optimistic. Barring a sharp slowdown in the Russian Federation, remittance inflows should remain sufficiently healthy for growth to continue in 2014 and 2015, stimulating private consumption, imports, and budget revenues. On the supply side, greater diversification into the production of new industrial products and agricultural crops will contribute to more sustainable growth. However, the economy remains vulnerable because income, consumption, and the balance of payments depend heavily on remittances, and because the outlook is weak for the economy’s two main exports: aluminum and cotton.

Source: ADB. 2014. Asian Development Outlook 2014. Manila.