The messenger logo

IMF reports Caucasus feels impact of adverse shocks

By Gvantsa Gabekhadze
Wednesday, May 20
Growth in the Caucasus and Central Asia (CCA) is expected to decline by 2 percent this year as a result of lower commodity prices and the economic slowdown in Russia, says the latest regional forecast by IMF staff.

The Regional Economic Outlook Update for the Caucasus and Central Asia, released on May 19, predicts growth in the region will reach just over 3 percent this year.

This latest forecast represents a downward revision of 2? percentage points from the one released by the IMF in October 2014.

“The twin shocks of the economic slowdown in Russia, a key trading partner, and lower oil prices are taking a toll on the region,” Juha Kahkonen, Deputy Director of the IMF’s Middle East and Central Asia Department told the media.

“Exchange rate developments—such as the appreciation of the U.S. dollar and the depreciation of the ruble—are compounding the problem. Overall, the outlook for the region has not been this weak since the global financial crisis in 2008-09.”

Growth will slow to 1.5 percent this year in the CCA’s oil importer countries; Armenia, Georgia, the Kyrgyz Republic, and Tajikistan, the IMF report said.

The IMF explains that these countries are heavily dependent on remittances from Russia, which have fallen sharply. The drop in remittances has erased any gains from lower oil prices, and the current account deficit for these countries is expected to reach 11 percent this year.

"These countries are also experiencing a reduction in export revenues as a result of lower commodity prices in general, as many of them export minerals such as gold, copper, and aluminium,” the report said.

The report also offers that the CCA’s oil and gas exporters—Azerbaijan, Kazakhstan, Turkmenistan, and Uzbekistan—should see growth decline to 3 ? percent in 2015 from 5? percent last year.

“In some of these countries, the impact from lower oil prices and Russia’s contraction is being amplified by a slowdown in domestic oil production and delays in development of new oil fields,” IMF says.

The government of Georgia claims that the current harsh depreciation of the lari towards the dollar, 32% downfall since November 2014, is because of foreign shocks.

However, the government assures that the national currency will become stable in the near future.

Meanwhile the opposition emphasizes that apart from foreign factors it was the government’s unreasonable policy that pushed the country into the current economic crisis.

The opposition party United National Movement (UNM) states that the Russian-Ukrainian conflict would have definitely caused certain economic problems in Georgia and the current government failed to timely take the factor into account.