Central Asia, Caucasus to see modest recovery in 2010

Banking crisis will continue to impact Kazakhstan

The Caucasus and Central Asia region will see a modest recovery in 2010, with energy exporters enjoying the strongest growth apart from Kazakhstan, which is hamstrung by problems in its banking sector, the IMF said on Saturday.

Azerbaijan, Turkmenistan and Uzbekistan will record solid growth in 2009 and beyond owing to long-term energy export contracts, supportive policies, and limited linkages to international markets, the International Monetary Fund said in a report.

Turkmenistan is projected to be the stand-out performer with economic growth of 15.3 percent next year.

By contrast, energy importers Armenia, Georgia, the Kyrgyz Republic and Tajikistan face a marked slow down in growth this year and falling living standards, particularly due to lower remittances from workers abroad in Russia, which are down 30 percent in the year to mid-2009.

"The region as a whole should see a modest recovery in 2010, although the degree of the upturn will vary among countries. The energy importing low-income countries still face a difficult year ahead, and some countries will need additional donor support to contain the adverse impact of the crisis," IMF Middle East and Central Asia Director Masood Ahmed said at a news briefing on the report.

Armenia is seen hardest hit in 2009 with an economic contraction of 15.6 percent, recovering to feeble growth of 1.2 percent in 2010. Kazakhstan is forecast to contract by 2 percent this year but return to growth of 2 percent in 2010.

The IMF urged countries in the region to preserve exchange rate flexibility or move toward flexible exchange rate regimes to discourage speculative capital flows.

Energy importers would need additional donor supReutersport to prevent the build-up of unsustainable debts, while energy exporters should use higher revenues on structural reform, Ahmed said.

Reuters