The Asian Development Bank (ADB) has upgraded Tajikistan’s economic forecast for 2023 and 2024.
Growth remains robust in Tajikistan, only minimally disrupted by the Russian invasion of Ukraine, says a report released by the ADB on September 20.
“ADB Asian Development Outlook, September 2023 — Caucasus and Central Asia” notes that economic expansion accelerated from 7.4% year on year in the first half (H1) of 2022 to 8.3% in H1 2023 as industry and services rebounded, and on sizable remittances from migrant workers in high demand in the Russian Federation.
Recall, ADB’s Asian Development Outlook (ADO) released in April predicted growth at 5.5 percent in 2023 and at 6.5 percent in 2024.
The September report notes that industry surged by 24.4% on gains in electrical supply and manufacturing, in particular food processing, textiles, and clothing. Expansion in agriculture reportedly increased from 6.0% to 7.9% after good weather allowed spring crops to be sown early. Growth in services slowed from 12.8% year on year in H1 2022 to 5.5% a year later with lower growth in transportation, communication, and financial services, and despite large gains in wholesale and retail trade and hospitality services.
The report notes that growth has been supported by higher public and private investment. The average inflation-adjusted salary increase accelerated from 2.8% year on year in H1 2022 to 11.8% in H1 2023. Moreover, in March
2023 the government boosted salaries by 20%–25% for military and law enforcement personnel, followed by a 20% rise in July of base pensions and other social benefits—all of which lifted private consumption. Gross investment grew by 27.1% year on year during the first 6 months of 2023. With strong growth reported in H1 2023, this update raises growth projections for 2023 and 2024.
Inflation has decreased considerably. Inflation dropped sharply from 8.3% year on year in June 2022 to 2.4% in June 2023 as average inflation year on year fell from 7.0% in H1 2022 to 3.0%. Food price inflation rose slightly from 2.3% to 2.9% as prices for other goods rose by 2.3%. For services, 1.1% inflation reversed to 0.4% deflation, with planned utility tariff increases postponed to H2 2023. Inflation subdued, the National Bank of Tajikistan, the central bank, lowered its policy rate from 13.0% to 11.0% in February 2023 and to 10.0% in May, partly to boost investment and domestic spending. The Tajik somoni depreciated by 7.0% against the US dollar in H1 2023 but appreciated by 11.4% against the Russian ruble. In view of these developments, and despite upcoming utility tariff increases, this update reduces inflation projections for 2023 and 2024.
Higher revenue and a tight fiscal stance have improved the fiscal outlook. Following a small deficit last year, the government kept the deficit below the equivalent of 0.5% of GDP in H1 2023. Though a new tax code initially reduced revenue in 2022, tax revenue in H1 2023 exceeded original projections by 7.3% to reach 22.5% of GDP. Collection of many major taxes outpaced original projections, with corporate income up by 12.3% from H1 2022, value added by 6.5%, property by 9%, and excise by 32.6%. Expenditure was $1.7 billion in H1 2023, 10.1% shy of the original budget allocation and reflecting a tight fiscal stance.
Public debt was $3.6 billion at the end of June 2023, having fallen from the equivalent of 34.8% of GDP at the end of 2022 to 31.1%.
Strong remittances narrowed the current account deficit. The merchandise trade deficit in H1 2023 nearly doubled year on year as exports declined by 44.2% to $0.7 billion while imports rose by 19.1% to $2.7 billion. However, remittances were strong enough to narrow the current account deficit by 28.7%, from 12.4% of GDP in H1 2022 to 7.8% in H1 2023. Gross international reserves rose from $2.5 billion to $3.8 billion, providing cover for 9 months of imports of goods and services.
