Macroeconomic reports

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.

The structural constraints of the Belarusian economy and the decline in external demand, coupled with the incident on the Druzhba oil pipeline, which negatively affected the performance of a number of industries, led to a slowdown in Belarus' GDP growth to 0.9% in the first half of 2019. At the same time, the delayed effects of pro-inflationary factors, formed in 2018, affected the acceleration of annual inflation to 5.7%, which is higher than the target set by the National Bank at the level of 5% for the year. At the same time, monetary policy has had a restraining effect on price growth. The loss of revenues from trade in oil and petroleum products affected both the reduction of budget revenues and the deterioration of foreign trade indicators. Nevertheless, the augmented government budget balance remained positive against the background of conservative spending policies, and the current account deficit remained at the level of the first half of 2018 due to the increased surplus in trade in services. The updated forecast of the EFSD shows a slowdown in Belarus' economic growth from 2.4% to 1.7% at the end of 2019, which reflects a stronger- than- expected slowdown in the growth of major trading partners and a more significant decline in world prices.