Macroeconomic reports

In 2019, real GDP growth accelerated to 7.6% from 5.2% a year earlier due to faster growth in consumption and exports of goods and services. The largest contribution to the growth of the economy was made by consumption as a result of a significant increase in consumer credit and real wages. The contribution of exports was mainly due to the growth of exports of metals and products made from them (precious metals, copper) as a result of the resumption of work of large metal rolling and mining enterprises after a long downtime, as well as alcoholic beverages. At the end of the year, 12-month inflation in Armenia slowed from 1.8% to 0.7%, and core inflation – from 2.6% to 0.7%, which goes against the forecasts of the Central Bank, which predicted a smooth approach of inflation to the target level of 4±1.5%. The largest slowdown in inflation was observed in the food segment, including due to lower prices for imported food against the background of some strengthening of the nominal exchange rate of the dram.

The decline in external demand for non-energy goods, including due to the strengthening of the real exchange rate of the Belarusian ruble, as well as a sharp decline in exports of oil and petroleum products, were key factors in slowing the growth of the Belarusian economy in 2019 to 1.2%, compared with 3.1% in 2018. Growth in domestic demand also slowed, which, together with the exhaustion of the effect of pro-inflationary factors of previous years, contributed to a decrease in consumer inflation at the end of the year. In December 2019, 12-month inflation was 4.7% compared to 5.6% in December 2018 and the NB's target of 5%. Monetary policy, in general, had a restraining effect on inflation and inflation expectations, which was reflected, among other things, in a decrease in the level of core inflation. The decline in revenues from oil and petroleum products trade has had a noticeable impact on the compression of budget revenues, while the expenditure part of the consolidated budget has expanded due to increased expenditures of the Social Protection Fund. Despite the negative revenue dynamics, the consolidated budget was executed with a surplus. The unfavorable external economic environment affected the deterioration of foreign trade indicators.

In 2019, the GDP growth was 4.5% compared to 3.8% a year earlier as a result of faster growth of exports of goods and services. An increase in production of base metals at the Kumtor field development enterprises led to accelerated export of gold. At the same time, exports excluding gold slowed down against the background of an almost twofold reduction in economic growth in Russia, accompanied by a decrease in demand. By December 2019, inflation accelerated to 3.1% from 0.5% a year earlier, remaining however below the targeted range of 5-7% set by the KR National Bank. In the context of low inflation, the KR National Bank maintained the expansionary nature of its monetary policy. The existing level of prices was mainly a result of an increase in food prices, which accelerated markedly in the second half of the year. The budget deficit fell to 0.1% of GDP down from 1.1% of GDP a year earlier on the back of an increase in state budget revenues as a result of growth in non-tax revenues and grants.

In 2019, Tajikistan's GDP grew by 7.5% compared to 7.3% in 2018 due to rapid growth in consumption and exports. An increase in remittances contributed to maintaining high consumer activity in the context of almost zero growth in real wages. A rise in gold production led to an increase in exports. Inflation accelerated to 8% at the end of the year, against 5.4% a year earlier, which is mainly due to the rise in price of wheat and flour imported from Kazakhstan. The growth rate of the monetary base increased significantly in the context of easing the NBT’s policy and that pushes the inflation risks up. A decline in public investment has contributed to a more balanced budget, despite a fall in revenues. In 2019 the budget deficit decreased by 0.8 percentage points to 2.9% of GDP, compared to the previous year. The trade deficit fell by 0.8 percentage points to 26.8% of GDP, mainly due to lower imports.

Armenia's economy grew by 5.3% in 2018. Growth was significantly aided by increase in inventories, including those to be used in the exploration of the Amulsar gold mining site. Inflation remained well below the target range of the Central bank of Armenia due to the real appreciation of the exchange rate, slowing consumer demand and subdued world food prices. Consolidation of budget expenditures in accordance with the requirements of the new Budget Rule and changes in tax legislation has brought a reduction in the fiscal deficit and resulted in the surplus of the primary balance.

In 2018, strong growth in consumption led the acceleration of economic growth to 3%. Wages and credit growth supported consumer demand. Conservative interest rate policy allowed the National Bank of Belarus to keep inflation within the targeted value. Favorable market conditions, reinforced by reduced public state financial support to the SOEs, ensured the increase in the Augmented Budget surplus. Despite pressures coming from imports of consumption goods, the current account deficit continued to decelerate as a result of the favorable global price of oil and potassium.

In 2018, Kyrgyzstan's GDP grew by 3.5%, driven by consumer demand, which was supported by the inflow of remittances. At the same time, compared to the previous year, economic growth slowed down on the back of consolidation of public capital expenditures. Inflation remained well below the target of the National Bank favored by a good harvest. In 2018, budget deficit significantly declined to 2.1% of GDP as compared to 5.8% of GDP a year earlier, driven by both expenditure reduction and revenue growth.

In 2018, Tajikistan's economy grew by 7.3% amid slowing inflation. The key drivers of growth were public capital spending aimed at the implementation of key public investment projects, in particular, the construction of the Rogun HPP. High share of imported goods in those investments reflected in deterioration of the balance of payments. The dynamics of inflation was mainly influenced by non-monetary factors, in particular, a good harvest and the resumption of trade with Uzbekistan. In the coming years, Tajikistan’s economic growth is expected to remain at comfortable levels supported by consumption and investment.

In the first half of 2019, Tajikistan's economy grew by 7.5% amid a sharp acceleration in inflation, primarily food one. The key driver of growth remains public investment aimed at the implementation of major projects, in particular, the construction of the Rogun HPP. The decline in total investment led to a slowdown in investment and intermediate imports, which resulted in a slight reduction in the foreign trade deficit.

Armenia's economic growth slowed to 6.8% in the first half of 2019 as a result of a reduction in investment activity in the mining sector and a slowdown in the state capital expenditures. The driver of economic growth was consumer demand side, supported by an increase in consumer lending, as well as the growth of domestic income and income coming from abroad in the form of remittances. Annual inflation reached the lower limit of 2.5% of the target bound of the Central Bank of Armenia, but core inflation remained low under the influence of weak growth in the money supply. Maintaining high rates of economic growth and public control on expenditure growth led to a surplus execution of the state budget. Despite a slowdown in external demand and supply constraints on some major export items, favorable terms of trade have helped to reduce the current account deficit. For 2019, the EFSD forecast of economic growth was revised upwards from 4.4% to 5.4% due to changes in the dynamics of foreign trade, in particular, a decrease in the volume of investment imports.