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Press Release: IMF Expects Modest Recovery in the Caucasus and Central Asia
October 3, 2009
The region’s energy importers—Armenia, Georgia, the Kyrgyz Republic, and Tajikistan—are facing a marked slowdown in growth and deteriorating living standards (Chart 1) as a result of a sharp drop in remittances (Chart 2)—especially from Russia, which is in recession and has had to shed jobs previously filled by CCA workers. Armenia is likely to suffer a contraction of more than 15 percent and Georgia 4.0 percent, in 2009, while the Kyrgyz Republic and Tajikistan are faring better.
CCA countries should continue to pursue fiscal policies that support growth and keep social protection a priority. The energy importers will need additional donor support on concessional terms to prevent a buildup of unsustainable debt levels, while the energy exporters should use part of their anticipated uptake in revenue from rising energy prices to proceed with structural reforms.
Financial sectors across the region are under stress, notably in Kazakhstan, and restoring financial health remains a priority. The region’s vulnerabilities in this sector call for close monitoring of CCA financial systems as well as enhanced supervision and crisis preparedness.
The IMF also recommends that countries in the region continue to preserve exchange rate flexibility or move towards flexible exchange rate regimes over time to maintain competitiveness and discourage speculative capital flows.
