The uncertain external environment resulting from continued ruble depreciation and the weakening of the People’s Republic of China (PRC) yuan and Kazakh tenge is expected to affect Tajikistan mainly through remittances and through external trade, as trade with the Russian Federation, the PRC, and Kazakhstan represented about 60% of the country’s 2014 imports and 26% of exports.
|Selected economic indicators (%)||2015||2016|
|ADO 2015||Update||ADO 2015||Update|
|Current Account Balance (share of GDP)||-5.9||-5.9||-4.8||-4.8|
Source: ADB estimates.
Tajikistan’s growth slowed to 6.4% in the first half of 2015 as industrial expansion moderated to 14.9% from 16.8% a year earlier, reflecting relatively meager 3.5% growth in aluminum, and as spillover from recession in the Russian Federation cut services growth to 0.8%. Agriculture maintained 6.9% growth. Retail trade and services are expected to decline further in the second half of 2015, offsetting moderate growth in industry and agriculture.
Average inflation moderated to 5.5% in the first half of 2015, reflecting auctions of securities by the National Bank of Tajikistan and of Treasury bills to reduce liquidity. The Tajik somoni depreciated by about 18% against the US dollar during this period and by 32% against the ruble, even with currency interventions by the National Bank of Tajikistan.
A 32% fall in remittances in the first half of 2015 from the same period in 2014 contributed to a 25% decline in imports, as exports fell by about 8%.
The Asian Development Outlook (ADO) 2015 Update trims the 2015 growth forecast from that of ADO 2015. Slower expansion is expected to carry over into 2016 despite expected recovery in the Russian Federation, prompting a similar trimming of that forecast.
Inflation forecasts for 2015 are in line with the ADO’s, while inflation is raised to 7.0% for 2016 in view of expected price increases for food and utilities reflecting in part upcoming salary hikes in the public sector. Inflation could accelerate further as a result of gradual depreciation of the Tajik somoni and currency controls that curb production and imports, thereby increasing prices for both domestic and imported goods.
Despite the uncertainty, the ADOU 2015 retains the ADO 2015 forecasts for current account deficits in 2015 and 2016, as the decline in imports resulting from lower remittances should offset a possible decline in exports caused by currency depreciation in the PRC and Kazakhstan.
Excerpted from the Asian Development Outlook 2015 Update.