ADB expects economic growth decline across Central Asia in 2005

/REUTERS, Almaty, Olzhas Auyezov, Tatyana Seroshtanova, April 6, 05/ - Asian Development Bank expects an economic growth slowdown in Central Asian countries due to commodities price decline at world markets, the Bank's Asian Development Outlook 2005 report says. According to ADB, GDP growth rate in 2005 will fall down in every country of the region will be as follows: - Kazakhstan - 8.5 pct versus 9.4 percent in 2004, - Kyrgyzstan - 5.0 pct (7.1 pct in 2004), - Tajikistan - 8.0 pct (10.6 percent in 2004), - Turkmenistan - 10.0 percent (nearly 21 percent in 11 months of 2004), - Uzbekistan - 5.0 pct (7.7 pct in 2004). KAZAKHSTAN According to the Bank analysts, GDP forecast to moderate to 8.5% in 2005 reflecting some easing in world oil prices and a softening of global growth though oil production is expected to rise from 56 million tons in 2004 to 69 million tons in 2007. According to ADB forecasts in 2006-2007 economic growth will likely continue at around 8%. "In the medium term, however, the oil and gas sector will remain the principal engine of economic expansion, with services, construction, and manufacturing continuing to play their supporting roles", the report says. According to Kazakhstan Statistics agency oil and gas condensate output in 2004 reached 59.4 m tons. Kazakh government expects oil output to reach 64.0 m to 79.3 m tons by 2007 depending on oil prices. "Fueled by increases in public sector wages and expansion in the money supply, inflation is expected to again be at the higher end of the current NBK target range (4.5-6.5%)", the report says. The government expects GDP growth in 2005 at 7.9%, average annual inflation at 4.9 - 6.5 percent. In 2003 Kazakhstan GDP grew by 9.3 percent, average annual totaled 6.7 percent. According to ADB forecasts, the tenge is expected to continue appreciating but a weakening in world oil prices would halt this. Exports of goods will likely remain buoyant at the level of $20 billion-35 billion given expected world prices for Kazakhstan's major commodities (oil and metals), and projected production trends. Driven by anticipated strong domestic demand, imports of goods are set to rise to around $15 billion in 2005 and to about $23 billion in 2007. The trade balance is forecast to record a surplus in the medium term, scaling up from $7.7 billion in 2005 to $8.6 billion in 2007. The current account balance is projected to be positive at around 1-1.5% of GDP over 2005-2007, despite a rising trend deficit in services, income, and current transfers as payment outflows grow, especially of foreign investors' earnings. 2005 budget deficit in Kazakhstan totaled 1.7 pct and the government proposes to lift it to 1.9 pct to increase social spending. Following are old and updated forecasts of the bank for 2005-2007 (in %): ------------------------------------------------------ 2005 ------------ old new 2006 2007 ---------------------------- --- ------- ---- ---- GDP growth 9.0 8.0-8.5 8.0 8.0 Inflation 6.0 6.0 5.7 5.3 Trade balance surplus ($ bn) n/a 7.7 n/a 8.6 ------------------------------------------------------ KYRGYZ REPUBLIC, UZBEKISTAN, TAJIKISTAN AND TURKMENISTAN According to ADB projections, Kyrgyz GDP growth is expected to decelerate to 5.0% in 2005, reflecting depletion and continued decline in gold production at the Kumtor gold mine. "On the political side, the March 2005 uprising and apparent change of government appear to be related mainly to governance issues rather than to economic policy", the Bank says. "Decline in gold production at the Kumtor gold mine could be off set to some extent in 2006-2007 if production begins as scheduled at the Jerui and Taldy-Bulak mines", the report reads. Tajikistan economic growth achieved in the last several years depended to a large extent on external factors and the Bank expects a slowdown due to anticipated global price trends and capacity constraints in aluminum production. Situation in Turkmenistan, according to the ADB, will be much dependent on world oil and gas price, which will most likely fall down by 2005. "This contrasts with IMF's estimate of 7.5% growth in GDP for the whole of 2004", the report says. Some of the key sources of recent growth in Uzbekistan have an uncertain future, including strong prices for commodity exportsЧin particular cotton where prices have weakenedЧbut also gold and energy. ADB also notes that almost all countries of the region could have achieved higher growth rates by focusing on reforms and economic diversification. Asian Development Bank is intergovernmental bank created for the purpose of financing development projects in Asia and Pacific regions. [2005-04-06]