The countries of Central Asia are experiencing very strong growth in real wages and public revenues. The European Bank for Reconstruction and Development (EBRD) says in its latest Regional Economic Prospects report.
It notes that the economies of Central Asia are showing strong resilience to the geopolitical adversities caused by Russia’s war on Ukraine. EBRD is expecting the region’s GDP to grow by 4.3 percent in 2022 and 4.9 percent in 2023.
«Central Asian states, such as Kazakhstan and Turkmenistan, are enjoying record high oil and gas revenues as a result of elevated prices and increased export volumes. Kyrgyzstan, Tajikistan and Uzbekistan continue to receive substantial remittances from Russia, where the demand for migrant workers is growing dramatically,» the report says.
Many countries in Central Asia are benefiting from Russian households seeking to obtain international payment cards and place their foreign currency savings in Central Asia.
Thousands of Russian speakers (from Belarus, Russia and Ukraine) are relocating and moving their businesses to Central Asia, taking advantage of special economic zones. As a result, the region’s capital cities are experiencing a real estate boom, as well as strong expansion in hospitality and catering.
«Regional economies, such as Kazakhstan and the Kyrgyz Republic, are also benefiting from re-exports to Russia of computers, consumer electronics and home appliances, spare auto parts, and electrical and electronic components, often facilitated by small shuttle traders,» EBRD says.
Regional currencies collapsed after Russia’s invasion of Ukraine but they have largely reverted to their pre-war values. Financial sector regulators brought in tougher compliance measures to reduce the risk of further collapses from any secondary sanctions.
The most urgent challenge all Central Asian economies are facing today is inflation and, in the slightly longer term, debt service costs.
CPI inflation is in the 10-16 percent range, way above the target corridors, which jeopardises the wellbeing of many households and puts structural reforms and fiscal consolidation measures at risk.
