## Regional Economic Outlook: Middle East and Central Asia — Executive Summary for the Caucasus and Central Asia Region

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**Canonical URL:** [Regional Economic Outlook: Middle East and Central Asia — Executive Summary for the Caucasus and Central Asia Region](https://www.imf.org/-/media/files/publications/reo/mcd-cca/2018/november/en/cca/eng-cca-highlights.pdf)

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### Growth performance and outlook
- Growth in the CCA region was 4.1 percent in 2017, up from 2.5 percent in 2016.
- Oil-importing countries in the region grew at 5.9 percent in 2017.
- Drivers of 2017 growth:
  - Higher oil prices supporting oil-exporting countries.
  - Strong public investment in Azerbaijan.
  - Increased demand for metals and agricultural products supporting Kazakhstan.
  - Rising remittances and strong external demand aiding oil importers.
- Short- and medium-term outlook:
  - Growth is expected to drop back to 4 percent in 2018 and 2019.
  - Over the medium term, growth is expected to stabilize at around 4.2 percent.
  - At this pace, it will take the region nearly two decades to reach the per capita income levels of emerging Europe.
- Historical context:
  - The medium-term projected growth rate is less than half of the average growth rate experienced in the early 2000s.

### Risks and vulnerabilities
- External risks:
  - Indirect impact of escalating global trade tensions could lower commodity prices and weaken growth prospects of key trading partners.
  - Unexpected tightening of global financial conditions could induce capital flow reversals, sharp exchange rate movements, and higher domestic interest rates.
- Domestic risks:
  - Reform complacency as temporary commodity price boosts may lead to deferral of needed structural reforms.
  - Weak financial sectors, high public debt, and external vulnerabilities heighten overall risk.

### Policy priorities and recommendations
- Accelerate reforms to strengthen the role of the private sector:
  - Enhance institutional frameworks.
  - Seek more opportunities for regional integration.
- Fiscal policy:
  - Further fiscal consolidation is needed to rebuild buffers.
  - Pursue growth-friendly fiscal consolidation by rebalancing the composition of adjustment and moving to a more progressive tax structure to ensure equity and growth-friendliness.
- Financial sector and banking system:
  - Strengthen the banking system by improving governance and enforcing regulatory compliance to enhance resilience to external shocks.
- Policies to foster private-sector-led growth:
  - Increase access to finance.
  - Invest in education.
  - Invest in infrastructure.
  - Improve government effectiveness.

### Analytical chapter findings
- Achieving growth-friendly fiscal consolidation is possible even with limited fiscal space by rebalancing fiscal adjustment composition and adopting a more progressive tax structure.
- A dynamic, job-creating private sector can be fostered by increasing access to finance, investing in education and infrastructure, and improving government effectiveness—measures that help boost the region’s potential to attract private investment and increase private-sector-led growth.

*Regional Economic Outlook: Middle East and Central Asia — Executive Summary for the Caucasus and Central Asia Region*

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_Source: https://www.imf.org/-/media/files/publications/reo/mcd-cca/2018/november/en/cca/eng-cca-highlights.pdf_