The EBRD has revised its predictions for Azerbaijan’s GDP growth upwards from 1.5% to 3% and 2.5% in 2015 and 2016 respectively while downgrading the prospects of most of its Central Asian neighbours. The development bank cited the high liquidity of the state-run SOFAZ sovereign wealth fund and the extent of its foreign exchange reserves, and also argued that this February’s devaluation of the manat had helped reduce pressure on the country’s economy.
While it expects Turkmenistan’s economy to grow at the fastest rate of all the Central Asia economies, the news was not so good for the region as a whole, however. “Growth and financial stability in Central Asia in 2015 have been significantly affected by the recession and currency depreciation in Russia and lower prices of oil and other commodities,” it reports. “Growth in Kazakhstan, the largest economy in the region, is sharply lower due to the collapse of the oil price and, to a much lesser extent, the negative effect of an influx of cheap imports from Russia on domestic industries and spillovers of negative investment sentiment from the Russia/Ukraine crisis.”
Predictions by region – 2015 & 2016
- Central Asia – 3.8% & 3.9%
- Central Europe and the Baltic States – 2.9% & 3%
- Eastern Europe and the Caucasus – (5.1%) & 1.4%
- SouthEastern Europe – 1.6% & 1.6%
- Southern and Eastern Mediterranean – 4% & 4%
Predictions by country – 2016 & 2017
- Kazakhstan – 1.2% & 1.5%
- Kyrgyzstan – 5% & 3.9%
- Mongolia – 3.3% & 5%
- Russia – 4.2% and 1.2%
- Turkey 3% & 2.8%
- Turkmenistan – 8.5% & 8.5%
- Uzbekistan – 7.5% and 7.2%
The EBRD is particularly concerned about
- Growth prospects in China and emerging markets
- Expectations of monetary policy tightening in the U.S. and quantitative easing in the Eurozone
- Even lower prices for oil and other commodities
- Increased geopolitical risks relating to conflicts in the Middle East and Ukraine
- Slowing global trade flows, according to the EBRD.
The bank is also warning that the outlook is subject to major risks, including a sharper-than-expected deceleration in China and stronger-than-expected increases in interest rates in the US, increasing political instability and geopolitical tensions and uncertainty in domestic politics in Greece, which could cause turbulence in the Eurozone.