major macro economic indicators
|2014||2015||2016 (f)||2017 (f)|
|GDP growth (%)||6.7||6.0||6.0||4.5|
|Inflation (yearly average) (%)||6.1||8.9||9.9||11.5|
|Budget balance (% GDP)||0.0||-2.3||-4.0||-3.8|
|Current account balance (% GDP)||-2.8||-6.0||-5.0||-5.0|
|Public debt (% GDP)||28.2||34.1||46.9||58.1|
(e) Estimate (f) Forecast
- Significant hydroelectric potential
- Wealth of raw material resources (aluminium, cotton and minerals)
- Financial support of international donors, including China
- Weak foreign exchange reserves
- Dependence on remittances from expatriate workers
- Risk of destabilisation associated with Islamist terrorism
- High levels of poverty and poor performance regarding governance
Downturn in public investment likely to dampen growth in 2017
Growth, sustained in 2016 by considerable public investment, is expected to decline in 2017. Activity in the construction sector will continue to be sustained by the various major projects launched in 2016, like the construction of the massive Rogun dam. However, investments overall are expected to slow, while private investment will remain hampered by an unsatisfactory business climate and high interest rates (up from 9% to 11% in July 2016).
Meanwhile, the Tajik economy, which is highly dependent on expatriate remittances (accounting for about 30% of GDP), three quarters of which come from Russia, is expected to be hit by weak flows of revenue from workers employed abroad. Despite the end of Russia's economic recession, remittances are likely to remain limited by Moscow's decision to enact a law limiting immigration, specifically from countries which are not members of the Eurasian Economic Union. Household consumption, affected by the downward trend in this important source of income, could, furthermore, slow in response to the acceleration in prices.
Inflation looks set to be fuelled by higher electricity prices and more expensive imported products resulting from the somoni's depreciation against the dollar.
No improvement in the twin deficits
Budget expenditures are projected to continue to be directed towards welfare in 2017 (40% of total spending). The government intends to pursue its programme of infrastructure investment, but is likely to revise its plans downwards in order to avoid too great a deterioration of the deficit. Electricity subsidies could be reduced, especially those in favour of the aluminium company TALCO, which are very costly in budget terms. Support for the banking sector is, however, expected to put pressure on the public finances. Budgetary revenue, mainly derived from taxes, is likely to be hit by the weakness in activity, keeping the deficit at current levels.
The current account deficit is unlikely to decline. Exports are not projected to increase, given the lack of significant movements in export prices (for aluminium, zinc and metals) and given expectations of only weak growth in demand from Tajikistan's main export markets (Turkey, Kazakhstan).
Because of the weakness of the manufacturing base, making the country highly dependent on foreign products, imports are expected to remain high, especially those needed for infrastructure projects. A reduction in the deficit will not be helped by a lack of any increase in expatriates' remittances, but international financial support (China, EBRD, IMF) could prevent further deterioration.
The country will remain vulnerable to external shocks, given the movement in its currency's exchange rate. After the sharp depreciation observed in early 2016 (-11% against the dollar between January and mid-February), the central bank (NBT) intervened to defend the somoni's exchange rate, thus stabilising the currency. The highly restrictive exchange controls had to be eased, because of their impact on the economy. The level of exchange reserves, put at 2.5 months of imports (including gold) in July 2016, leaves little leeway for the NBT to support the currency. Downward pressures are still expected to persist, given the current account deficit, and could force the State to devalue the somoni in 2017. An exchange rate adjustment could also be among the conditions set by the IMF for the conclusion of a financial aid agreement currently being negotiated. The topic of banking will also be at the heart of these discussions, because of the sector's worsening position, as reflected by the increase in non-performing loans (from 14% in late 2015 to 30% in June 2016).
A complex geopolitical environment and ethnic dissension
Elected to the presidency for the fourth time in a row in November 2013, Emomali Rahmon obtained popular support by referendum in May 2016 allowing him to stay as Head of State for an unlimited term. The other constitutional amendments approved at the same time provide for a reduction in the minimum age for presidential candidates from 35 to 30 years, which will allow Mr Rahmon's son to stand for office in 2020, if his father (64 years) is unable to stand again.
The security situation remains unstable, given the extremist threat from the Taliban on the Afghan border and the risks of Islamist terrorism spreading within the country. Meanwhile, tensions continue to run high over proposals to delimit the borders with Uzbekistan and Kirghizstan. The worsening economic situation and high poverty levels (over 30% of the Tajik population lives below the poverty threshold) could exacerbate social tensions.
Finally, performance regarding the World Bank's governance indicators, already weak with regard to the fight against corruption (180th in 2015 out of 204 countries), is on a worsening trend.
Last update: January 2017