Tajikistan : Moderated Growth, Heightened Risks
2014
World Bank Group
Tajikistan s economic growth moderated to 6.7 percent in the first half of 2014 from 7.5 percent a year earlier as activity slowed in almost all sectors. Weaker world economic growth and lower prices for cotton and aluminum adversely affected the major export-oriented industries, pushing total industrial growth below 3 percent from nearly 7 percent a year earlier. Lower inflows of remittances due to the slowdown in Russia have translated into lower domestic demand and slower growth in services and housing construction. Though growth in agricultural output also moderated due to heavy rains and low temperatures, it was still a healthy 6 percent. Inflation began to pick up as food prices rose and tariffs for utilities were adjusted, reaching 4.7 percent for the first half of 2014 compared to 1.6 percent a year earlier. However, fixed investment grew swiftly as the public investment program got underway. GDP growth is projected to ease to 6.5 percent in 2014 because of the spillover effect from the slowdown in Russia and in export sales. A Russian slowdown affects Tajikistan largely through the remittances channel. A slackening in remittances weighs heavily on household demand, notably demand for services and housing construction. Inflation pressures are expected to increase but stable global food prices should help to keep growth in inflation within a single digit. Despite slower economic growth the fiscal deficit is projected to remain unchanged in 2014 because of higher than expected revenues from foreign trade, reforms in revenue collection, and spending restraint. The current account deficit is projected to widen to 3.7 percent of GDP because of sluggish export growth and the remittance slowdown. Tajikistan could perhaps benefit from the Russian ban on import of food from the West but fragile market links, limited economies of scale, poor access to credit, and barriers to entry and expansion limit Tajik ability to benefit from increased Russian demand.
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