The European Bank for Reconstruction and Development (EBRD)’s latest Regional Economic Prospects (REP) report says the economies of Central Asia demonstrated strong growth in the first half of 2023, bolstered by a resumption of international trade and tourism, as well as high levels of migration and remittances from Russia. 

According to the Bank, GDP growth in the region is likely to remain robust at 5.7 percent in 2023 and 5.9 percent in 2024.

The recent bout of growth – driven by government spending, China’s reopening, intermediated trade with Russia, as well as remittances, tourism and business relocation from Russia – is likely to continue.  The REP notes, however, that higher borrowing costs may affect the scale and appetite for investment in the region.  At the same time, recent water and energy supply disruptions may prompt long-overdue tariff reforms, as well as better resource management.

The economy of Kazakhstan is set to grow by 5.0 percent in both 2023 and 2024, though with some uncertainty arising from oil prices. The country has seen significant expansion in sectors such as retail and wholesale trade and construction.  There has also been a pick-up in public and private investment in infrastructure, transport and warehousing.  

The GDP of Kyrgyzstan is reportedly expected to grow 4.6 percent in 2023 and 7.0 percent in 2024.  The country’s economic growth slowed to 2.9 percent year on year over the first seven months of 2023 due to a contraction in metals output (mostly gold) and the agricultural sector. At the same time, the domestic textiles sector boomed thanks to strong external demand. There was also significant expansion in tourism, triggering growth in food production, hospitality, and retail and wholesale trade. The REP warns Kyrgyzstan’s outlook could be worsened by energy and water shortages as well as secondary sanctions related to Kyrgyzstan’s outsized role in intermediated trade with Russia.

The economy of Tajikistan is expected to post strong growth of 7.5 percent in both 2023 and 2024.  Stronger regional cooperation, public investment (particularly in water and energy infrastructure), the inflow of remittances from Russia and strong performance of the manufacturing and agricultural sectors are key influencing factors.  A slowdown in Chinese growth and potential conflicts over transboundary water resources may negatively affect the outlook.

Uzbekistan’s GDP growth is set to reach 6.5 percent in both 2023 and 2024, fueled by strong domestic demand, an increase in nominal wages and credit growth.  Sectors such as retail trade, construction, services and agriculture perform particularly well.  Well-managed initial public offerings (IPOs) and privatizations may strengthen the outlook.  Further reductions in remittances (particularly from Russia), aging infrastructure and water supply issues are among the factors that may hamper growth.