Economic Review Tajikistan April 2015

Economic Review Tajikistan
Economy of Tajikistan slows down in the
first quarter
Quarterly GDP growth, % y/y
Source: TajStat
№ 4, 2015
During the first quarter of 2015, the economy of Tajikistan showed
positive growth, but with slowing trends. In this period, the GDP of
Tajikistan grew by 5.3% y/y, a deceleration compared to 7% y/y
growth recorded in the same quarter of 2014.
The drivers of GDP growth were industry, with 16.7% y/y growth
rate, and trade, which grew by 10.7% y/y. Inside industry,
extraction of non-energy materials, metallurgy and production of
electricity led the growth. Agriculture showed 5.3% y/y increase, a
much lower growth rate compared to 13.8% y/y in the first quarter
of 2014. Construction, the former locomotive of growth, showed
virtually zero growth rate: 0.9% y/y growth was officially recorded
compared to 38.1% y/y increase in the same period of 2014.
A slowdown was also reflected in the external sector. In the first
quarter of 2015, turnover of foreign trade decreased by almost 12%
y/y, coming down to USD 966 m. Exports grew by 12.7% y/y, but
the growth was mainly due to operations of the National Bank
with gold. On the imports side, there was a decrease by 17% y/y.
Virtually all items saw decrease except for imports of machinery
and again precious metals.
A deceleration of the Tajik economy is recognised by many
institutions. The consensus forecast of GDP growth in Tajikistan in
2015, taken as an average of forecasts of the IMF, WB, ADB and
EBRD, is 3.65% y/y. Meanwhile, the official forecast of the
Government of Tajikistan has not been revised since July 2014.
State budget revenues are lower than
planned
Ministry of Finance reported that the state budget was executed
95.6% according to the plan in the first quarter of 2015. The
Customs Office reports that customs payments to the state budget
fell short of plan by 24.1% in the first quarter. In an attempt to react
to this situation, Minister of Finance Abdusalom Kurboniyon
strongly requested responsible authorities to reach budget
revenues targets during the second quarter of 2015.
The state budget for 2015 was built based on assumptions of strong
economic growth and 7.2% increase of GDP; the exchange rate was
expected to be 5 TJS/USD. However, the economy is slowing down
and the exchange rate at the end of April was 6.25 TJS/USD.
In this situation, execution of the budget at the previously planned
level becomes problematic. Trying to reach the targets by putting
pressure on tax payers may lead to the opposite of the desired
effect: tax evasion and lower economic activity in Tajikistan,
resulting in lower economic growth and lower budget revenues.
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In fact, Tajikistan faced such a situation in 2009. In that year, the
budget was planned based on 7% GDP growth, although due to the
global economic crisis GDP growth in Tajikistan came to only 3.9%.
In recognition of the slowing economy, revenues and expenditures
of Tajikistan’s budget were cut in May 2009.
More administrative pressure on foreign
exchange market
Exchange rate, TJS/USD
On 16 April, the National Bank of Tajikistan (NBT), on very short
notice, ceased all operations of private foreign exchange offices
starting from 17 April 2015. Only foreign exchange offices working
under the authority of financial institutions were allowed to keep
working. Thus, out of a total 1581 foreign exchange offices, 818
were closed overnight. During the course of April, some of the
closed private foreign exchange offices altered registration
documents and reopened as part of financial institutions. The NBT
declared that the aim of this move was to ensure sustainability of
the foreign exchange market and stability of the TJS exchange rate.
The Prosecutor’s Office also made itself visible at the foreign
exchange market and warned about opening criminal and
administrative cases against foreign exchange law violators for
illegal foreign currency exchange and trading using foreign
currency.
Source: NBT
In spite of all the administrative pressure on the foreign exchange
market, in April 2015, TJS devalued by 7% compared to USD.
UNDP report draws attention to labour
market mismatch
UNDP presented its National Human Development Report 2014
Tajikistan: Access to Resources for Human Development. One of
the vital issues raised in the report was demographic and
employment patterns.
Labour market in Tajikistan, th. people
The report argues that the growth of the working age population in
Tajikistan is significantly faster than the growth of employment.
Only one in four people that joined the labour force between 2007
and 2013 could find a job. The labour force participation rate (taken
as ratio of employed people to working age population) has fallen
from 53% in 2007 to 49% in 2013. To compare, labour force
participation rate in other CIS countries is about 60%. The report
projects that the working age population will grow by more than
120 thousand people annually and reach 6,044 thousand in 2020.
Source: TajStat, UNDP
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Such fast growth rates, coupled with the possible return of labour
migrants, create massive pressure on the economy of Tajikistan
and its labour market. Factors that could ease pressure on
Tajikistan’s labour market could be vocational education and
development of the private sector that would absorb labour force.
Tajikistan’s Macroeconomic Data
2009
2010
2011
2012
2013
2014
20,628.5
24,704.7
30,071.1
36,161.1
40,524.5
45,605.2
4,982.7
5,640.3
6,523.6
7,592.6
8,506.0
9,047.6*
3.9
6.5
7.4
7.5
7.4
6.7
Industrial production real growth, % y/y
-6.5
9.2
5.7
10.4
3.9
5.1
Agricultural production real growth, % y/y
10.5
6.8
7.9
10.4
7.6
4.5
-15.5
-8.0
5.5
-24.4
17.2
25.3
Trade real growth, % y/y
12.5
7.5
9.1
16.9
19.3
6.5
Exports of goods, USD m
1,008.9
1,195.3
1,452.3
1,359.0
1,163.3
977.4
Imports of goods, USD m
2,568.8
2,657.8
4,217.5
3,778.6
4,121.3
4,338.8
Remittances to Tajikistan, USD m
1,861.8
2,420.7
3,171.4
3,715.2
4,200.0
3,900.0
Exchange rate, USD, av.
4.1
4.4
4.6
4.8
4.8
5.04*
Consumer Price Index, av., % y/y
6.4
6.5
12.5
5.8
3.7
7.4
46.7
45.0
41.0
38.2
35.6
32.0
Money supply (M2), TJS m
2,601.9
3,214.3
4,334.4
5,014.3
5,726.1
5,821.8
Refinance rate, average, %
9.0
8.5
13.0
14.8
6.2
6.2*
35.8
34.4
32.5
28.5
25.7
22.8
7.4
7.6
7.8
8.0
8.1
8.3**
Nominal GDP, somoni m
Nominal GDP, USD m
Real GDP growth, % y/y
Construction real growth, % y/y
Poverty level, %
External debt, % of GDP
Population, m
Sources: TajStat, NBT, MoEDT, MF, *- author’s calculations and estimates, ** data on 01.10.14
Notes:
m
bn
y/y
million
billion
year over year change
q/q
av.
p.p.
quarter over quarter change
average
percentage point
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Published by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH
Registered offices Bonn and Eschborn, Germany
Responsible ‘Framework and Finance for Private Sector Development in Tajikistan’
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Authors: Igor Eromenko, Takhmina Saidahmadzoda
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