World economies
Tajikistan is a small, landlocked, low-income country located in Central Asia. It is the poorest of the Commonwealth of Independent States where 19.5 per cent of the population lives on less than $1.90 per day and 56.6pc lives on less than $3.10 per day.
Its economy is dominated by minerals extraction, metals processing, agriculture and reliance on remittances from overseas workers.
It has one of the lowest per-capita gross domestic products (GDP) among the 15 former Soviet republics. The country is rich in water resources. Large reserves of snow and glaciers are accumulated in the country.
Tajikistan has sought to develop its substantial hydroelectricity potential through partnership with Russian and Iranian investors. The government is pursuing completion of the Roghun dam, which would be the tallest dam in the world.
The energy market is an important area for economic opportunity. It produces hydropower for regional export and is heavily depended on international humanitarian assistance for much of its basic subsistence needs. The poor business climate remains a hurdle in attracting foreign investment.
In 2017, a recovery in remittances contributed to growth as well as narrowed the current account deficit. The economy grew by 7.1pc as the external environment strengthened and public investment continued.
Private consumption was boosted by a 32pc year-on-year increase in remittances from Russia. Strong growth is expected again this year, although it will moderate from 2017’s four-year high to 6pc in 2018 with tighter fiscal policy.
Healthy remittance inflows and higher wages stemming from a tighter labour market should buoy private consumption. The growth in 2019 will slightly recover to 6.5pc on gains in manufacturing and mining, higher remittances and the expanded replacement of imports with local alternatives.
The fiscal deficit hit 9.8pc of GDP in 2016, which narrowed to 2.4pc in 2017. Over the next two years, fiscal policy is expected to remain tight, with the budget deficit projected to remain at 2.5pc of GDP in 2018 and 2019.
Slower growth and constrained imports are projected to limit revenues to 30.2pc of GDP in 2018 and 30.9pc in 2019. Expenditure is forecast to equal to 32.7pc of GDP in 2018 and 33.4pc in 2019 while accelerated debt repayment and demand for public spending forecast to raise outlays.
Public and publicly guaranteed debt increased from 42pc of GDP in 2016 to about 50pc in 2017. Tajikistan’s external debt reached $2.9 billion at the start of 2018, crossing the psychologically important 40pc mark.
The government faces challenges financing the public debt as the National Bank of Tajikistan has aggressively spent its reserves leaving little space for fiscal or monetary measures to counter any additional economic shocks. Recent slowdowns in the Russian and Chinese economies, low commodity prices and currency fluctuations are hampering economic growth.