Caucasus, Central Asia faces downside risks: IMF
IMF says countries in the Caucasus and Central Asia continue to post a solid recovery from the global financial crisis, and the region’s economic outlook remains favorable.
The IMF’s Regional Economic Outlook for the Middle East and Central Asia, released November 11, projects growth in the region at an average of about 5½ percent for 2012 and 2013. This resilient growth reflects high oil prices that are benefiting the region’s oil and gas exporters, supportive commodity prices and remittance inflows for the oil and gas importers, and, for both groups, moderate direct exposure to Europe, the IMF report says.
“The positive outlook provides an opportunity to strengthen policy buffers to prepare for any potential adverse economic conditions, such as a slowdown of world commodity demand or rising food prices,” Juha Kähkönen, Deputy Director of the IMF’s Middle East and Central Asia Department told a press conference in Almaty, Kazakhstan.
For the oil- and gas-importing countries Armenia, Georgia, the Kyrgyz Republic, and Tajikistan growth will remain firm at 5 percent in 2012, before increasing to 5.8 percent in 2013. Robust remittance inflows from Russia and high commodity prices underpin this outlook, with the Kyrgyz Republic benefiting from higher gold production. Inflation across the Caucasus and Central Asia is projected to remain fairly muted on average in 2012, on account of rapidly falling food inflation in the oil- and gas-importing countries. However, higher global food prices, if sustained, may rekindle inflation given the high sensitivity of local food prices to global prices, particularly in the oil and gas importers.
Oil- and gas-exporting countries could cushion the impact through temporary subsidies or similar measures, which their substantial fiscal space can accommodate, the IMF assessment says. It adds that the oil and gas importers are slowly rebuilding their fiscal buffers. However, these cushions still fall well short of what is needed to enable a policy response in the event of unfavorable developments in commodity markets.