## CCA Region Highlights

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**Canonical URL:** [CCA Region Highlights](https://www.imf.org/-/media/files/publications/reo/mcd-cca/2017/october/ccanovember1/8-cca-highlights.pdf)

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### Improved Yet Subdued Economic Outlook
- Growth in the Caucasus and Central Asia (CCA) started to pick up during the second half of 2016, and is projected to accelerate from 2.5 percent last year to 3.6 percent in 2017 and 3.7 percent in 2018.
- A stronger outlook for oil production in Kazakhstan in 2017, the largest economy in the region, means these projections are 0.4 percentage point stronger in 2017, and similarly weaker in 2018, relative to the May 2017 Regional Economic Outlook: Middle East and Central Asia Update.
- Strengthening economic conditions in the region’s main trading partners and some firming of commodity prices, combined with continued implementation of structural reforms, are anticipated to support the recovery.
- Medium-term growth is forecast to remain below historical norms—CCA growth is projected to average 4.3 percent in 2019–22, less than half the rate during 2000–10.
- Reforms promoting diversification away from remittances and commodities should be accelerated to secure strong, sustainable, and inclusive growth.
- To capitalize on opportunities for integration into the strengthening global economy—including through China’s Belt and Road Initiative—institutional frameworks should be enhanced to facilitate productive investment and foster private sector development.
- Short-term risks to the outlook are balanced, but medium-term risks remain tilted to the downside, reflecting global risks such as the possibility of inward-looking policies in advanced economies that could affect trade and commodity prices and a more rapid tightening of global financial conditions.

### Comprehensive Set of Policies Needed for Stability and Growth
- The legacy of adverse external shocks since mid-2014 has left the region more vulnerable and with fewer buffers to manage future unexpected developments.
- Financial sector resilience measures should continue, given concerns about banking systems’ capacity to support economic activity in some countries. Policy actions should focus on:
  - enabling an accurate assessment of banks’ health,
  - developing effective bank resolution frameworks,
  - enhancing prudential regulation and supervision, and
  - resolving governance issues.
- Fiscal balances deteriorated in recent years as policymakers accommodated lower budget revenues in the context of falling commodity prices and remittances—the average fiscal deficit is forecast at 3.4 percent of GDP this year.
- Fiscal policy recommendations:
  - Continue fiscal consolidation efforts to rebuild buffers,
  - Channel public expenditures efficiently,
  - Improve tax collections,
  - Protect social safety nets.
- Monetary policy priorities, given that the exchange rate no longer serves as an anchor for domestic prices in most CCA countries and exchange rate depreciation pushed inflation into double digits in some economies:
  - Establish clear monetary policy objectives,
  - Enhance central bank independence and communication,
  - Improve the transmission mechanism for monetary policy and the analytical toolkit of central banks.
- Structural reform priorities to promote strong, sustainable, and inclusive growth:
  - Accelerate reform implementation,
  - Enhance the business environment,
  - Restructure and privatize state-owned enterprises,
  - Improve governance.

### Key Statistics: CCA Region Selected Economic Indicators, 2000–18
(Percent of GDP, unless otherwise indicated)
- CCA (Projections)
  - Real GDP (annual growth): 8.3 5.3 3.1 2.5 3.6 3.7
  - Current Account Balance: 0.8 2.3 –3.6 –6.4 –4.9 –4.2
  - Overall Fiscal Balance: 3.1 2.3 –3.5 –2.2 –3.4 –1.0
  - Inflation (year average, percent): 9.2 5.9 6.4 10.5 8.9 7.8
- CCA Oil and Gas Exporters (Azerbaijan, Kazakhstan, Turkmenistan, and Uzbekistan)
  - Real GDP (annual growth): 8.6 5.3 3.1 2.4 3.5 3.7
  - of which non-oil growth: 8.7 6.7 3.1 1.7 2.4 3.0
  - Current Account Balance: 2.1 3.6 –3.0 –6.2 –4.4 –3.6
  - Overall Fiscal Balance: 4.0 2.7 –3.5 –1.7 –3.3 –0.7
  - Inflation (year average, percent): 9.5 6.1 6.6 11.6 9.3 8.2
- CCA Oil and Gas Importers (Armenia, Georgia, the Kyrgyz Republic, and Tajikistan)
  - Real GDP (annual growth): 6.4 4.7 3.8 3.3 3.9 3.8
  - Current Account Balance: –7.7 –9.2 –8.9 –7.9 –8.6 –8.2
  - Overall Fiscal Balance: –3.3 –1.3 –3.1 –6.1 –4.2 –3.7
  - Inflation (year average, percent): 7.4 4.6 4.8 1.9 5.3 4.7

*Source: IMF staff calculations and projections; national authorities.*

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_Source: https://www.imf.org/-/media/files/publications/reo/mcd-cca/2017/october/ccanovember1/8-cca-highlights.pdf_