Tajikistan's economy enjoyed about 8% growth annually over the past decade thanks to a favorable external environment and high prices for its main exports, but following the crisis it now faces challenges related to energy and to job creation.
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Tajikistan’s economic growth moderated to 6.7 percent in the first half of 2014, down from 7.5 percent a year earlier, as activity slowed in almost all sectors.Weaker world economic growth a... Show More +nd lower prices for cotton and aluminum adversely affected the major export-oriented industries, pushing total industrial growth below 3 percent from nearly 7 percent a year earlier.Lower inflows of remittances, due to the slowdown in Russia, have translated into lower domestic demand and slower growth in services and housing construction. Though growth in agricultural output also moderated, due to heavy rains and low temperatures, it was still a healthy 6 percent. Fixed investment grew swiftly as the public investment program got underway.Inflation began to pick up as food prices rose and tariffs for utilities were adjusted, reaching 4.7 percent for the first half of 2014, compared with 1.6 percent a year earlier.GDP growth is projected to ease to 6.5 percent in 2014, because of the spillover effect from the slowdown in Russia and in export sales.A Russian slowdown affects Tajikistan largely through remittances channels. A slackening in remittances weighs heavily on household demand, particularly demand for services and housing construction.Inflation pressures are expected to increase, but stable global food prices should help to keep growth in inflation within a single digit. Despite slower economic growth, the fiscal deficit is projected to remain unchanged in 2014, because of higher than expected revenues from foreign trade, reforms in revenue collection, and spending restraint.The current account deficit is projected to widen to 3.7 percent of GDP, due largely to sluggish export growth and the slowdown in remittances.Tajikistan could potentially benefit from the Russian ban on imports of food from the West, but fragile market links, limited economies of scale, poor access to credit, and barriers to entry and expansion limit Tajikistan’s ability to benefit from increased Russian demand. Both domestic and external risks face the country. The main risks to the near-term outlook relate to serious vulnerabilities and governance issues in the financial sector, fiscal risks from state-owned enterprises (SOEs), a slower recovery in the prices of aluminum and cotton, and a further slowdown in activity in Tajikistan’s main trading partners.The pace and financing of large infrastructure projects are also highly uncertain. The main transmission channels through which adverse external shocks could impact the Tajikistan economy are remittances (partly because migrants may return) and external trade.Reinforcing fiscal and external buffers will be critical to mitigating the impact of external shocks, particularly in light of Tajikistan’s strong links with Russia and other important trading partners such as Kazakhstan, Turkey, and China.In the near-term, prudent macroeconomic policies, such as greater exchange rate flexibility, could help the country absorb any shocks. A comprehensive structural reform program is needed in order to bolster growth, create jobs, and reduce poverty – especially as risks are intensifying.Reforms to improve the business-enabling environment need to go hand-in-hand with comprehensive public sector reform. Among the highest priorities are to address financial sector vulnerabilities and assure proper SOE governance to minimize fiscal risks and deliver cost-efficient services to consumers.Beyond general reforms, specific challenges need to be addressed in many sectors where SOEs operate, such as energy, infrastructure, and delivery of other services. Policies to facilitate absorption of returning migrants into the local labor market will also be important.Over the medium-term, prudent macroeconomic management and structural reforms directed towards diversification and better integration into global and regional markets could create more economic opportunities and reduce Tajikistan’s vulnerability to shocks.Investing in human and institutional capital could support productivity improvements and job creation, and ultimately speed up the transition to a more sustainable growth model. Show Less -
The Programmatic Public Expenditure Review (PPER) is the part of the World Bank's ongoing analytical and advisory activities, which provide a solid platform for policy dialogue and discussions with th... Show More +e Government of Tajikistan and other stakeholders on a range of key issues and reforms. The PPER consists of three policy notes – “Government Expenditures: Size, Composition and Trends”, “Review of Public Expenditures on Health”, “Review of Public Expenditures on Education” - completed in 2013, and three policy notes - “Key Issues in Public Finance Management”, “Fiscal Risks from State-Owned Enterprises”, “Capital Expenditures and Public Investment Management” - completed in 2014.The Policy notes aim to inform fiscal policy and expenditure prioritization in key areas of the budget to improve the efficiency and quality of public spending and to support the structural transformation of the economy. More specifically, they are:Policy Note No. 1 “Government Expenditures: Size, Composition and Trends” sets a stage for the further in-depth discussion of the issues, identified in the note, based on the analysis of trends and composition of public spending during the last six years. It begins with a brief review of macroeconomic context to provide the background for analysis of fiscal policy during the last six years and implications for fiscal policy going forward; presents the overall fiscal picture and highlights the fiscal risks to be addressed to sustain the recent progress in fiscal consolidation; shows composition and trends of expenditures and revenues and provides brief conclusions.Policy Note No. 2 “Review of Public Expenditures on Health” examines public expenditures on health in Tajikistan. The note describes the institutional and administrative structure of the health sector; presents health outcomes and health care utilization indicators; describes health financing and presents the main options to expand fiscal space for health; reviews the health financing and organizational reforms implemented in Tajikistan.Policy Note No. 3 “Review of Public Expenditures on Education” examines public expenditures on education in Tajikistan, focusing on assessing efficiency and equity of general education spending. It reviews the characteristics of Tajikistan’s educational system, including access and equity in enrollment and quality of education; analyzes overall public spending on education and a breakdown by financing source, subsector, and expenditure category, as well as unit costs by level of education; examines general education financing—the largest spending unit within the education sector—in more depth; covers demographic trends and enrollment projections and their implications on education spending.Policy Note No. 4 “Key Issues in Public Finance Management” describes the current state of public finance management (PFM) reform in Tajikistan; examines the amount and nature of public spending; and explores the objectives the Government aims to accomplish through its spending. This note provides a number of recommendations to the Government to help achieve its stated PFM reform objectives.Policy Note No. 5 “Fiscal Risks from State-Owned Enterprises” reviews the role of state-owned enterprises (SOE) in Tajikistan's economy and identifies key issues. It assesses the fiscal risks posed by SOEs, especially those in the energy sector; and provides possible solutions. The Note also benchmarks SOEs governance framework and practices in Tajikistan against OECD principles and provides recommendations for strengthening the SOE governance and transparency.Policy Note No. 6 “Capital Expenditures and Public Investment Management” analyzes the composition and trends in capital expenditures; reviews a public investment management process in Tajikistan along the capital budgeting cycle (planning, budgeting, implementation, and audit) and provides recommendations for improving efficiency of capital spending and strengthening public investment management. Show Less -
Regionally, East Asia and the Pacific drives the aggregate trend in GDP growth and continues to show relatively strong economic performance. On average, its GDP growth increased from 5.3 to 6.7 p... Show More +ercent between the first quarters of 2012 and 2013, respectively. This can largely be attributed to the GDP growth in China (at 7.7 percent), as well as the sharp rise in Thailand (from 0.4 to 5.3 percent) and in the Philippines (6.5 to 7.8 percent). However, the income growth rates in these countries have not improved the situation in their labor markets. Show Less -