The International Monetary Fund sees the 4.5% economic growth in Caucasus and Central Asia overall both in 2019 and 2020, despite tensions in world trade and a slowdown in the growth of major trading partners, Reuters reported. 

The IMF called on former Soviet republics to increase competitiveness, make better use of their natural advantages and diversify their economies to reap the benefits of trade and integration.

The Fund’s report covers the countries of the Caucasus - Armenia, Azerbaijan and Georgia, as well as the Central Asian states of Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan.

“Despite weaker trade, overall growth for the CCA region is expected to remain about 4.5% in 2019–20, largely owing to a looser fiscal stance and private sector credit growth,” it said.

“However, growth will not be sufficient to lift per capita incomes to emerging Europe levels or reduce unemployment given 4 million new entrants over the next 10 years,” the Fund said.

Among the external risks faced by the countries of the region, the IMF named increased trade tensions, a slowdown in global growth, lower commodity prices and rising geopolitical risks, while internal risks included a slowdown in reform.

The IMF said macroeconomic policies should focus on tackling weak banking sectors, strengthening fiscal institutions, investing in infrastructure and human capital, and modernizing monetary policy frameworks to maintain stable and low inflation and support greater exchange rate flexibility.

Growth in exports of goods and services by the region’s energy exporting nations is projected to drop to about 1.7% in 2019-20 from 23% in 2017–18.

It is projected that import growth for energy exporting countries will slow to 5.6% in 2019-20 from 10% in 2017-18 amid limited domestic demand in some countries.

Energy exporters include Azerbaijan, Kazakhstan, and Turkmenistan, while Armenia, Georgia, Kyrgyzstan, Uzbekistan and Tajikistan import all or most of their oil and gas.

The current account balance of the region will decrease to a deficit of 1.5% of GDP in 2019-20, compared with a surplus of 0.3% of GDP in 2018.