Tajikistan’s economy grew by 7.4 percent in 2013 as continued strong inflows of remittances bolstered domestic demand and reduced the negative impact of declining export performance. Record high remittance inflows, estimated at about US$4.1 billion in 2013 or equivalent to almost 49 percent of GDP fueled private consumption and, to a lesser extent, investment. Meanwhile, relatively weaker economic growth globally and lower prices for aluminum and cotton affected adversely Tajikistan’s export performance.
Tajikistan’s economy performed strongly in the decade following the end of the civil war in 1997. Strong economic growth, which averaged nearly 8 percent per annum during 2000-2008, was made possible by a favorable external environment, with world prices for country’s main export items of cotton and aluminum soaring. Rapid growth in Russia and other trading partners have boosted the demand for Tajik labor, which resulted in growth of remittances and a subsequent increase in domestic consumption. Internally, the Government’s efforts in stabilizing the economy allowed for existing businesses and households to take advantage of emerging opportunities.
Similar to other economies in the region, the 2009 global economic crises adversely affected Tajikistan. The effect came through a sharp decrease in remittances and decline in exports of its main commodities. The combination of government’s tighter fiscal policy, currency depreciation, and increased support from the development partners helped mitigate the adverse impacts of the crises. As a consequence the GDP has bounced back to 6.5 percent in 2010 from a low of 3.9 percent in 2009.
Nevertheless, continued vulnerabilities to external market shocks, susceptibility to natural disasters, underexploited economic diversification potential, limited arable land, and landlocked location make Tajikistan one of the poorest countries in the Europe and Central Asia region, with a GNI per capita of US$800 in 2011.
Responsible for 64 percent of total employment and 21 percent of GDP, the agricultural sector in Tajikistan offers a solid foundation for economic development. The Government displays a strong commitment to the ongoing agricultural reform, although the pace of implementation must be accelerated to secure the productivity gains that Tajikistan needs to improve the agricultural growth rate.
Tajikistan is also faced with a young and rapidly growing population. Recent estimates show that 40 percent of the population in Tajikistan is under the age of 17, making improved public services in social sectors (education, health, and social protection), as well as job creation, imperative components of Government’s Poverty Reduction Strategy.
Tajikistan’s biggest challenge in the coming years will be lifting its low rates of private investment. According to latest estimates, the private investment has stagnated at around 5 percent of GDP. The Government’s strategy has made removing binding constraints to private sector development a key priority to foster economic growth, and several key achievements have been made to date. In addition, implementation of the Extractive Industries Transparency Initiative has also been high on the Government’s agenda, to capitalize on Tajikistan’s comparative advantage in mining. Yet, the development of the private sector and the appropriate legal framework for its growth remain a work in progress, and their successful realization is critical to help the Government achieve its ambitious growth targets.