According to the latest Regional Economic Prospects (REP) report published by the European Bank for Reconstruction and Development (EBRD), Central Asian economies in 2024 are expected to see growth slowing to 5.4 percent. However, a rebound to 5.9 percent is expected in 2025.
The report notes that intermediated trade with Russia, which had been a significant growth contributor for many Central Asian economies in 2023, has now reached a plateau. Severe floods that hit Kazakhstan will negatively impact its growth in the short term but the region’s outlook for both 2024 and 2025 remains very positive.
The EBRD expects that the region’s public policy agendas in 2024-25 will be dominated by the need for urgent improvements in infrastructure and public management practices, implementation of politically sensitive tariff reforms and efforts to reach a broad regional agreement on the use of shared resources, such as transport, water and energy.
In 2023 the region’s largest economy, Kazakhstan, expanded primarily on the strength of consumer demand and public spending (partially financed by elevated transfers from the National Fund). Retail and wholesale trade were the main growth drivers, supported by rising wages and consumer lending. While oil export revenues declined on lower prices, exports to the Eurasian Economic Union countries provided a boost for non-oil activities, leading to increases in output and fixed capital investment. This trend continued in the first quarter of 2024, as GDP growth was supported by an expansion in non-oil sectors, such as construction, communication, transport and warehousing.
According to the REP report, downside risks to the outlook relate to severe floods hitting the country in late-March and April 2024. While elevated government spending is expected to soften their impact on aggregate demand, the floods’ full impact is yet to be assessed. The EBRD forecasts Kazakhstan’s GDP to grow by 4.5 percent in 2024. In 2025, economic growth will likely accelerate to 5.5 percent on account of higher oil production, a rebound in agriculture and potential privatisations.
In Uzbekistan, real GDP increased by 6.0 percent in 2023 driven by rapid credit expansion, rising remittances and international arrivals. The country’s economic growth was balanced, with services, construction and general industries being the main contributors. Export revenues rose significantly thanks to high gold exports, strong tourism revenues and growing shipments of foodstuffs and manufactured products.
The EBRD’s REP is predicting that ongoing tariff reforms will help cut energy subsidies, reducing public expenditures by an estimated 1.5 percentage points of GDP. The economy is forecast to expand by 6.5 percent in 2024 and 6.0 percent in 2025, with strong contributions from fixed capital investment and net exports. Privatisation and market-oriented reforms may strengthen the outlook by attracting foreign direct investment. On the downside, growth is likely to be constrained by chronic energy and water deficits.
