SEPT. 19 2015 (The Conway Bulletin) – Turkmenistan’s parliament, a rubber-stamping chamber for President Kurbanguly Berdymukhamedov, passed a law which will impose more tax on tobacco and alcohol. Turkmenistan has been looking to raise more tax during the current economic downturn.
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(News report from Issue No. 249, published on Sept. 25 2015)
SEPT. 21 2015 (The Conway Bulletin) – Georgia’s Central Bank said it bought $27m worth of lari to strengthen its currency. This is the 6th intervention by the Central Bank this year to prop up its currency which has lost around 37% since September 2014. It said earlier this year that it wouldn’t prop up its currency.
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(News report from Issue No. 249, published on Sept. 25 2015)
SEPT. 22 2015 (The Conway Bulletin) — The Asian Development Bank published an updated Outlook for the economies of Central Asia and the South Caucasus, downgrading growth prospects across the region.
The ADB set growth for 2015 at 3.3%, down from an earlier forecast of 3.5% and the organisation says inflation will hit 8.1% this year, triggered by the latest devaluing of the Kazakh tenge and the Kyrgyz som. In Kazakhstan, in particular, “the new exchange rate is expected to dampen consumption and investment further,” the ADB said. A worrying outlook.
The trend for lower capital investments across the region, however, could be reversed in 2016-17, according to the ADB. The governments will play a major role as drivers of future growth as the main source of investments for years to come.
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(News report from Issue No. 249, published on Sept. 25 2015)
SEPT. 22 2015 (The Conway Bulletin) – International ratings agency Moody’s lowered its growth prediction for Kazakhstan in 2016 to 2% from 2.2%. Moody’s kept its forecast for 2015 steady at 1.5%. Low oil prices have hit Kazakhstan’s budget and its ability to generate revenues.
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(News report from Issue No. 249, published on Sept. 25 2015)
SEPT. 23 2015, ALMATY (The Conway Bulletin) — The Kazakh Central Bank presented a bill to parliament that will force people to take loans in tenge, a tactic it says is necessary to wean the economy off its addiction to US dollars.
Shaken by a 40% drop in the value of the tenge over the past 18 months, the Central Bank wants to ensure that commercial banks do not accrue a large amount of bad loans in US dollars as they did during the 2008/9 Global Financial crisis.
“This is an effort to protect customer’s rights and to decrease the rate of non-performing loans for second-tier banks,” Kuat Kozhakhmetov, deputy chairman of the Central Bank, said when he presented the bill to the parliament.
If the bill becomes law, people who have not earned their salary in a foreign currency for the 6 months before asking for a loan will will only be able to apply for a tenge loan.
According to a recent IMF study, almost 60% of the total loans issued by financial institutions in Kazakhstan are denominated in a foreign currency. The Central Bank also said that 14% of mortgages are currently denominated in foreign currencies.
People in Kazakhstan have used foreign currency loans to buy goods indexed to the US dollar or the Russian rouble, such as houses or cars. Salaries are often paid in tenge but are indexed to the US dollar.
A fall it the value of oil and a slump in the Russian economy has pressured the tenge and other regional currencies. Loans taken out in US dollars have become much more expensive to service.
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(News report from Issue No. 249, published on Sept. 25 2015)
SEPT. 21 2015 (The Conway Bulletin) – Gold production in Azerbaijan increased by 30% between Jan.- Aug. this year to 1.5 tonnes, media reported quoting government data. Gold is not a major contributor to Azerbaijan’s earnings, which is dominated by oil and gas, but it is growing in importance.
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(News report from Issue No. 249, published on Sept. 25 2015)
SEPT. 21 2015, BISHKEK (The Conway Bulletin) — When the US military quit its airbase outside Bishkek in July 2014, ambitious officials dreamt of turning Manas airport in a Central Asian transport hub that would connect Europe and South-East Asia.
A year on and this dream is still very much that. There have been no major investments.
In an interview with the Bulletin at his office in central Bishkek, Nursultan Belekov, the 24-year-old deputy head of Manas Airport’s investment department, explained his frustration.
“We have worked hard to attract Russian, Turkish and Chinese partners, but no one has contributed yet,” he said.
Earlier this year Rosneft rowed back on an earlier promise to invest in the airport, perhaps making Manas a victim of a sharp economic downturn hitting the region.
Mr Belekov, who is standing for parliament in October’s election, had a different spin on Rosneft’s pull out from Manas.
“They offered to invest $1b dollars, but we were needed to refuse because Manas airport is a strategic object for Kyrgyzstan’s independence, and a 51% stake cannot go to a foreign company,” he said. Manas needs around $1.2b investment.
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Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 249, published on Sept. 25 2015)
SEPT. 25 2015 (The Conway Bulletin) – The Georgian Central Bank is one of the more open central banks in the region. It holds scheduled meeting and posts reasonably detailed explanations on its monetary policy decisions.
In short it can give people interested in Central Asia and the South Caucasus something of an insider’s view of things. This makes its statement on Sept. 23 that accompanied an interest rate rise all the more important.
And the Georgian Central Bank was blunt in its assessment of the problems facing the wider region.
“Real GDP growth in the second quarter was consistent with the forecasts,” it said. “The factor hindering growth is the external sector, which, given the dire economic situation in the region negatively affects export of goods and services.”
Of course the Georgian Central Bank was talking about poor GDP growth in Georgia but the more important word in this statement for the wider region was “dire”. The Georgian Central Bank had said what other government economists from Tajikistan to Kazakhstan to Azerbaijan and Armenia have been thinking but shying away from saying. The prospects for their economies, with inflation rising and the values of their currencies falling, is dire.
Of course there are differences between the various regional economies – Kazakhstan and Azerbaijan are heavily dependent on oil and gas sales, for example, while Georgia isn’t – but many of the pressures are shared ones and if one Central Bank, in this case the Georgian one, starts describing the situation as “dire” it is important to listen.
By James Kilner, Editor, The Conway Bulletin
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(News report from Issue No. 249, published on Sept. 25 2015)
SEPT. 18 2015 (The Conway Bulletin) – Agricultural projects outnumbered any other sector for applications to a $1b Russian-Kyrgyz development fund for small and medium enterprises in Kyrgyzstan. The data highlights Kyrgyzstan’s predominantly agricultural economy.
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(News report from Issue No. 249, published on Sept. 25 2015)
SEPT. 23 2015, TBILISI (The Conway Bulletin) — Georgia’s Central Bank raised its key interest rate for the fifth time this year to dampen accelerating inflation.
At 7%, Georgia’s interest rate is at its highest level since December 2011. At the start of this year, Georgia’s key interest rate measured 4%.
“The monetary policy decision is based on the macroeconomic forecast, which indicates a sharp increase in the inflation expectations given the Lari depreciation against the US dollar, which raises the future risks as a result of a one-time deviation from the inflation target,” The Georgian Central Bank said in a statement.
Georgia’s lari currency has lost 37% of its value over the past year, much like other currencies in the region, and the Central Bank said that this had been a key driver for inflation which now measured around 5.4%, moving towards the top of its 5-6% target range.
It also said that the economic situation in the region was “dire” and that demand would stay weak.
“Domestic demand is also weak, as a result of both the decline in remittances and the increase in the service burden of foreign currency denominated loans,” the Bank said.
On the streets of Tbilisi, though, the economic pain was evident.
“I get my salary in lari, but I pay my mortgage in dollar. Instead of 800 we now have to pay 1200 Lari. How are we supposed to buy food?” said university administrator Anita, 37.
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Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 249, published on Sept. 25 2015)