Economy Overview

After gaining independence the Republic of Tajikistan has been implementing a consistent economic policy directed towards establishing a market economy. Through these policy measures Tajikistan has succeeded in reaching macroeconomic stability and relatively high pace of economic growth.

Key macroeconomic indicators
Table 1
Main Indicators 2002 2003 2004 2005 2006 2007 2017
GDP in current prices (mln. USD) 1115 1629 2010 2258 2810 3719 7.2
GDP growth (percent) 109,1 110,2 111,3 106,7 107 107,8 7.1
GDP per capita (USD) 190 236,7 309,7 337,5 404,8 515,5 812
External trade turnover (mln. USD) 1455,9 1679,2 2290,1 2238,5 3124,4 4015,3 39731
Inflation rate (percent) 14,5 13,7 5,7 7,1 12,5 19,7 6.7
Unemployment rate (percent) 2,6 2,4 2,5 2,2 2,2 2,3 2,2
Source: Ministry of Economic Development and Trade of the Republic of Tajikistan

 

COUNTRY CONTEXT

 

Economic growth

Despite continuing external challenges, Tajikistan’s economic output rose strongly in 2016, according to official estimates. Real GDP expanded by 6.9 percent, driven mainly by foreign-financed public and private investments.

At the same time, the protracted decline in real remittances and the depreciation of the exchange rate, in the context of an improving but still complex external environment, led to the reduction of current account deficit.

Decreased trade activity resulted in a fiscal revenue shortfall, while the exchange rate depreciation contributed to a surge in non-performing loans, reversing previous fiscal consolidation efforts and causing substantial disruption to the performance of the financial sector.

On the upside, strong growth and rising wage income pushed down the poverty rate from 32 percent in 2015 to an estimated 30.3 percent by the third quarter of 2016, driven primarily by an increase in wage incomes.

Macroeconomic Policy

In 2016, the Tajik authorities pursued expansionary fiscal policies, including through a considerable increase in foreign-financed capital investment in the energy sector, road infrastructure, and projects related to the country’s 25th anniversary of independence.

The government also stimulated domestic demand by raising public sector wages and social transfers. The exchange rate, although depreciating, stabilized throughout the year, following the introduction of administrative measures in February 2016.

Monetary policy was accommodative, supporting a heightened demand for local currency as the exchange rate stabilized and wholesale transactions that were previously conducted in foreign currency switched to local currency. Domestic purchases of monetary gold and the introduction of a surrender requirement on ruble-denominated transfers drove an increase in international reserves.

However, a disrupted financial sector and the subsequent bailout of Tajikistan’s two largest banks at end-2016 resulted in a deterioration of fiscal and debt sustainability indicators.

Economic Outlook

Although the external environment is expected to improve, rising domestic vulnerabilities pose a significant risk to maintaining robust economic growth.

Tajikistan’s real GDP growth rate is projected to slow down in 2017, before gradually recovering in 2018-19. However, growth will remain below 2016 levels in 2017–19.

Continuing challenges in the financial sector, high state-owned enterprise contingent liability risks, and an unconducive business climate add pressures on economic growth prospects. Ongoing bank asset quality reviews may reveal additional capitalization needs, while unfavorable tax administration may potentially erode the tax base and deter new investments.

Further poverty reduction will largely depend on economic recovery in Russia and domestic income growth. Continuing challenges in accessing credit by pro-poor sectors of the economy will diminish the pace of both poverty reduction and job creation in low-skilled sectors like construction and agriculture.

External trade

Tajikistan had foreign trade with 110 (88 in 2015) countries, of which 10 CIS countries and 100 foreign countries. As can be seen from Annex 3, the main trading partners in the export of goods were Turkey (22.3%), Kazakhstan (21.7%), Switzerland (11.0%), Russia (5.6%), Afghanistan (8.3%) and China (4.9%). Imports of goods amounted to $ 3.03 billion, which is 11.8% less than January-December 2015 due to unfavorable external environment and reduced consumption. The main import items were transport vehicles, machines, equipment (21.7%), minerals (16.0%), chemical goods (11.1%) and food (6.3%).

Economic trends
  • Tajikistan achieved significant progress in economic reforms, restructuring its national economy and strengthening international links. External trade and currency operations are liberalized. Small and medium business enterprises are fully privatized; restructuring and corporatization of big state enterprises are underway.
  • The government is attracting essential investments in road construction, development of the energy sector and mining industry. Significant attention is being paid to civil construction, services and trade. According to forecasts, due to the development of private sector and the growing household incomes, the country is expecting high economic growth.
  • It is also expected that the attracted investments will lead to growing outputs in the real sectors of economy. This will enable diversification of Tajikistan’s export potential, which at present heavily depends on aluminum and cotton industries.