## CCA0518-Presentation

## Source details

**Canonical URL:** [CCA0518-Presentation](https://www.imf.org/-/media/files/publications/reo/mcd-cca/2018/may/english/cca0518-presentation.pdf)

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- [Markdown version](/-/media/files/publications/reo/mcd-cca/2018/may/english/cca0518-presentation.pdf.md)
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### The Outlook for the Region
- Growth picked up in 2017 but is expected to moderate over the medium term.
- Real GDP Growth:
  - Charts separate Oil Exporters and Oil Importers; series labeled 2015, 16, 17 and projections 2018, 19, 20-22 (Apr-18).
- External and fiscal positions strengthened in 2017:
  - Current Account Balance and Overall Fiscal Balance presented as percent of GDP for 2010 through 2017.
  - Note: The overall fiscal balance excludes the one-time fiscal transfer to the financial sector in Kazakhstan in 2017.
- Real GDP in PPP and Real per Capita GDP in PPP indexed to 2015 = 100, with series covering 2015 through 2022 and comparisons to EMDEs.

### Drivers of the Outlook
- Global environment:
  - Supported by a strengthening global economy and higher trading-partner growth (real GDP growth of trading partners shown for World Output, EMDE, Euro Area, United States, China, Russia for 2017, 2018, 2019).
- Commodity prices:
  - A temporary boost to commodity prices shown by price indices (2005 = 100) and APSP Crude Oil, US$ per barrel (RHS); series cover 2014 through 2023 with "Projections" noted.
- Real effective exchange rates:
  - Increased competitiveness via real depreciation shown as three-month moving average, index 2015=100 for Jan-15 through Jan-18 with country series AZE, KAZ, TKM, UZB (oil exporters) and ARM, GEO, KGZ, TJK (oil importers).
- Remittances and commodity dependence:
  - Cyclicality of Remittances and Russia and CCA Oil Importers Growth shown; remittances are in USD billions.
  - Real GDP growth and real oil GDP growth exclude Uzbekistan due to data availability.
- Financial sector and fiscal capacity:
  - Limited room for fiscal stimulus: Gross General Government Debt (Percent of GDP) for 2011 and 2017 by country (AZE, KAZ, TKM, UZB, ARM, GEO, KGZ, TJK).
  - Financial sectors in need of repair: Problem Loans (Percent of total loans) latest available data by AZE, ARM, KAZ, GEO, KGZ, TJK; Problem Loans definition includes (1) overdue loans > 90 days; (2) watch loans < 90 days; (3) restructured/prolonged loans; (4) write-offs; and, (5) transfer to special-purpose vehicles or other vehicles. Private Credit Growth (average, percent, year-over-year) shown for CCA oil exporters, CCA oil importers, CCA.

### Need for a New Growth Model and Policy Priorities
- A new model of private-sector driven growth is needed to prevent output falling behind peers.
- Structural constraints (World Economic Forum Competitiveness Report 2017-18):
  - Challenges to Doing Business chart lists constraints including Access to finance, Inflation, Tax regulation, Corruption, Tax rates, Foreign currency regulations, Inadequately educated work force, Inefficient govt. bureaucracy, Poor work ethic in national labor force, Policy Instability, Insufficient capacity to innovate, Government instability.
- Policy priorities listed:
  - Fiscal Policy
  - Financial Sector
  - Structural Reforms
  - Monetary Policy
  - Integration Initiatives
  - Private-Sector Driven Growth
- Specific policy directions:
  - Rebuilding buffers within a comprehensive fiscal plan.
  - Strengthening monetary institutions (Inflation 2000-17 CPI percent change, year average; Inflation Targeting vs Other Regimes shown for country groupings with series 2000 through 2017).
  - Taking advantage of regional integration opportunities:
    - Trade Openness (Index 2009=100 of the sum of exports and imports as a percent of GDP in nominal terms) chart for 2009 through 2017 for CCA, CCA oil exporters, CCA oil importers, EMDE.
    - Estimated Contributions of Trade Openness to Growth (Percent) for CCA Oil Exporters and CCA Oil Importers; note: 2018‒22 expected annual growth 1/With trade openness (footnote: 1 2018‒22 expected annual growth is used as a proxy for long-term growth.For more information see Oct. 2017 MCD REO Chapter 4.)

### Case Study: Reform in Uzbekistan
- Past constraints on growth:
  - State intervention via regulation and state monopolies
  - Fixed exchange rate, foreign exchange restrictions
  - Inefficient import substitution
- 2017 reform plan and outcomes include:
  - Remove exchange controls
  - Price & trade liberalization
  - Public investment in transport & utility networks
  - Fewer visa restrictions for foreigners
  - Stimulate private sector growth
  - Increased trade through better integration
  - Positive spillovers for the region

### Fiscal Management Frameworks (Overview)
- Fiscal Rules and Medium-term fiscal framework status by country:
  - Armenia: Yes / Yes
  - Azerbaijan: In progress / No
  - Georgia: Yes / Yes
  - Kazakhstan: Yes / Yes
  - Kyrgyz Republic: In progress / No
  - Tajikistan: No / Yes
  - Turkmenistan: Yes / No
  - Uzbekistan: Yes / No
  - Note: 1 Medium-term budgeting is planned to be introduced in 2019.
  - Note: Fiscal rules are a mechanism for placing durable constraints on fiscal discretion through procedural and numerical limits on budgetary aggregates. Medium-term fiscal frameworks consist of institutional arrangements and procedural or numerical rules that provide incentives for overcoming the deficit bias.

### IMF Role and Support
- The IMF’s contribution includes programs and technical assistance:
  - IMF Programs and Technical Assistance delivery shown for countries KGZ, GEO*, ARM, AZE, KAZ, TJK, UZB, TKM (TA in Person-Months of Field Delivery, 2017).
  - * Georgia has a three-year program which started on April 12, 2017.

### Key Takeaways
- Growth picked up in 2017, but is expected to moderate over the medium term.
- A new model of private sector-led growth is needed to prevent the region from falling behind peers.
- Policy priorities are structural reform, comprehensive fiscal plans, strong monetary institutions, more resilient financial sectors, and increased regional integration.

*Source: CCA0518-Presentation (May 14, 2018) — Caucasus and Central Asia Regional Economic Outlook*

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_Source: https://www.imf.org/-/media/files/publications/reo/mcd-cca/2018/may/english/cca0518-presentation.pdf_