DUSHANBE, November 9, 2015, Asia-Plus -- The European Bank for Reconstruction and Development (EBRD)’s Regional Economic Prospects in EBRD Countries of Operations November 2015 noted that the outlook for growth in the EBRD region in 2015 and 2016 has remained broadly unchanged since the EBRD last forecast in May.

Remittances from Russia to Central Asia and the EEC continued to decline at rates close to 40 per cent year-on-year in US dollar terms, as predicted in the previous issue of Regional Economic Prospects .

According to the report, 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.  At the same time, foreign direct investment (FDI) and financial support from China and Russia, and to a lesser extent Western investors and IFIs, are increasingly contributing to growth and financial stability in the region.  Tajikistan, Kyrgyzstan and, to a lesser extent, Uzbekistan, have reportedly been hit by sharply declining remittances from Russia, with growth supported by FDI and financial assistance from China and Russia.  The currencies across Central Asia have weakened significantly, with double-digit depreciation in all counties during the course of 2015.

In Tajikistan, GDP growth is expected to decline to 5 per cent in 2015, compared with 6.7 per cent in 2014, reflecting a sharp contraction in remittances from Russia as well as the return of many migrants.  The negative effects of lower remittances are being mitigated by increased investment from China and, to a lesser extent, investment from other countries. The national currency, the somoni, has depreciated significantly in 2014 and 2015, contributing to a rise in non-performing loans (NPLs), given the very high level of dollarization in the country.  The Central Bank’s interventions in the foreign exchange market, as well as administrative measures, have helped to limit depreciation, but that has come at the expense of losing a significant part of international reserves, which now stand at a very low level.  Overall, the reduction in remittances, returning migrants and overall weakness of the economy heighten social security risks in the country.  Inflation is expected to reach 6.4 per cent in 2015.  Notwithstanding the fact that remittance flows from Russia might stabilize in 2016, the legacy of sharply lower remittances and returning migrants in 2015 as well as increasing NPLs can be expected to continue to weigh down on growth. GDP growth in 2016 is projected at 4.5 per cent, supported by expected strong FDI from China.