Macroeconomic reports

The reduction in foreign trade operations, the weakening of the Kyrgyz som, together with the difficulties encountered with the movement of goods during the state of emergency and the increase in socio-political tensions at the end of the year affected a sharp decline in economic activity and an increase in inflation. Under the negative impact of the COVID-19 pandemic, GDP fell by 8.6% in 2020, and inflation accelerated to 9.7% by the end of the year from 3.1% a year earlier. Against the background of a strong reduction in the volume of imports of goods, and the growth of gold prices, the current account balance formed with a surplus. Significant amounts of donor assistance have helped to increase the level of international reserves, and have helped to finance public spending on the fight against the pandemic against the background of declining state budget revenues.

The COVID-19 pandemic led to a slowdown in economic growth in Tajikistan to 4.5% against 7.5% a year earlier, however, due to the lower spread of the virus in the republic than expected, most economic indicators showed more favorable dynamics than expected at the beginning of the crisis. Despite the reduction in government revenues, the budget deficit remained practically unchanged, due to the reduction in non-priority spending. The improvement in the trade balance, driven by lower consumer and investment imports, as well as strong growth in gold exports, led to a current account surplus despite a decline in remittance inflows.

Refraining from quarantine measures combined with support to the state-owned enterprises prevented a deep economic recession in the Republic of Belarus. In 2020, the country's GDP contracted by 0.9 percent compared to growth by 1.4% in 2019. Net export was the only factor contributed to economic growth. The reduction in the export of petroleum products and the growth of state support for enterprises became the main factors behind the budget deficit, which amounted to 1.6% of GDP against a surplus of 2.3% GDP previous year. At the same time the non-primary export volumes increase and their import volumes decrease contributed to almost balanced CAB against 2% GDP deficit in 2019.

The COVID-19 pandemic and the Nagorno-Karabakh military conflict had a significant negative impact on the economic activities in the Republic of Armenia. In 2020, the real GDP dropped by 7.6 percent compared to its growth by 7.6 percent a year earlier due to the reductions   both internal and external demand.  Against this background, there was a decrease in the volume of tax revenues, and an increase in budget expenditures to support the population and the economy, causing an increase in the budget deficit to 5.4% of GDP against 1% of GDP a year earlier. Lower physical volumes of imports as a result of compressed consumer and investment demand, contributed to lower current account deficit.

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.