Macroeconomic reports

In the first half of 2020 Tajikistan’s economy suffered negative impact of COVID-19 pandemic and corresponding external shocks. The primary effect of pandemic on economy was realized via external trade channel. The decline of global demand and production led to diminished volumes of exports and imports, investment and remittances. That in turn resulted in depreciation of local currency. The decline of real income and salaries along with contraction of foreign investment led to significant slowdown in GDP growth. Budget revenues has decreased significantly due to economic support measures (which were implemented via tax exemptions) and worsened financial performance of SOE.

In the first half of 2020, the Kyrgyz economy was negatively affected by the COVID-19 pandemic and other external shocks. The impact of the spread of COVID-19 on the economy of the Kyrgyz Republic began to manifest itself through the foreign trade channel. The decline in global demand and production led to a reduction in foreign trade turnover, investment and remittances, which affected the weakening of the Som exchange rate.

In the first half of 2020, the real GDP dropped by 5.8% compared to growth by 7.1% a year earlier. The contribution of final consumption was negative, amounting to 5.9 p.p., due to lower remittances and weaker propensity to consume as a result of a sharp increase in uncertainty caused by the pandemic. The introduction of restrictions adversely affected the dynamics of investment demand, resulting in a negative contribution of gross capital formation of 4.3 p.p. The key factor contributing to a decline of exports by 7.7 p.p. was weaker economic growth in the country’s trading partners against the background of AMD real effective exchange rate appreciation by 1.5%. In June, the 12-month inflation stood at 1.7% against 2.5% a year earlier.

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.