ALMATY/DUSHANBE, Feb. 26 (The Conway Bulletin) — Kazakhstan verged on acknowledging that its economy may actually shrink this year and a Tajik Central Bank official said it was in talks with the IMF for an emergency loan, more signals that a sharp regional economic crisis was deepening further (Feb. 23).
Normally bullish about its own GDP growth predictions, the reconfigured Kazakh government GDP growth estimate of 0.5% is an important sign of the severity of the economic downturn linked to low oil prices.
Kazakhstan had earlier predicted GDP growth in 2016 at 2.1%.
“If the cost of a barrel of oil is $40, GDP growth will be 2.1%, but we’ve taken the conservative approach and have assumed that the price of oil will costs $30 per barrel and that GDP growth will hit 0.5%,” journalists quoted Yerbolat Dosayev, the economy minister as saying. Oil is currently around $35/barrel.
Importantly, this new GDP growth estimate is far closer to that of international economist who have said that Kazakhstan’s economy could shrink in 2016. The last time that Kazakhstan’s economy dipped into a recession was in 2008.
Low oil prices and a recession in Russia which has wiped out essential remittance and business investment flows have hit Central Asia hard. The scale and speed of the downturn appears to have wrong-footed leaders, including Kazakh president Nursultan Nazarbayev and his advisers. They have slashed government budgets and also sold off chunks of state-owned companies, but they haven’t been able to prevent the tenge from losing 50% of its value and inflation rising.
Officials are now worried about anti-government protests.
On the southern fringe of Central Asia, Tajikistan, the world’s most remittance-reliant economy, has also been reeling from the impact of the downturn. It has called in the IMF to try to organise an emergency loan.
Jamoliddin Nuraliev, deputy head of Tajikistan’s Central Bank, told the FT that talks with the IMF had begun.
“It’s crisis time,” he said.
Tajikistan has depleted its currency reserves in its Central Bank trying to defend the value of it somoni currency. At the same time, data has shown that the flow of remittances from Russia have dropped by around half.
>>This story was first published in The Conway Bulletin newspaper on Feb. 26 2016. For more information on the Bulletin — the top independent newspaper for Central Asia and the South Caucasus, click here
>>To subscribe to our free newswire service for Central Asia — Silk Road Intelligencer — click here