Country Report Tajikistan December 2008

Outlook for 2009-10

The Economist Intelligence Unit expects that Tajikistan will face a growing threat of instability in 2009-10. Given rising economic hardship caused by a slowdown in growth and a fall in remittances, and social pressures stemming from the return of large numbers of migrant workers, the long-term goal of structural reform will have to be balanced against preventing a rise in social unrest. Regional tensions appear to have been rising and the population is growing increasingly disillusioned with the authorities' inability to address economic problems. Real GDP growth is forecast to slow to only 2.5% in 2009, from an estimated 5.8% in 2008, as demand weakens in Tajikistan's main export markets, and as domestic industry continues to suffer from problems in the electricity sector. Annual inflation will fall rapidly in 2009-10, owing to the high base period and as international commodity prices fall. Lower prices for Tajikistan's food and fuel imports will lead to a narrowing of the trade deficit in 2009-10. However, the current-account deficit will widen because of a sharp drop in remittance inflows. The deficit is forecast to reach almost 15% of GDP in 2009.

The political scene

The security services have continued to pursue suspected Islamic extremists. The authorities have attempted to assert control over the regions by disbanding a regional police unit that was involved in a gun battle with central government forces earlier in 2008. Despite the relatively high placing of Tajikistan compared with its neighbours in an index of press freedom, the government has continued to put pressure on opposition journalists and dissenting voices.

Economic policy

The state budget continued to record a surplus in the first three quarters of 2008. The government has approved a budget for 2009 that targets a deficit of less than 0.1% of GDP. The Tajikistan Aluminium Company (Talco) has reached an out-of-court settlement in a dispute with its former partners. The Anti-Corruption Agency has recovered US$7m in embezzled state funds.

The domestic economy

The economy grew by 10% year on year in the third quarter of 2008, bringing growth to 7.2% in January-September, stronger than previously forecast. Year-on-year inflation decelerated to 17.9% in October 2008, with lower price rises for food and fuel driving the slowdown. Cotton production has continued to fall.

Foreign trade and payments

Tajikistan posted a trade deficit of US$1.44bn in the first ten months of 2008, with imports rising by 38% year on year. External debt rose to almost 30% of GDP by end-September. Remittance inflows have continued to rise.

This report covers the following industry codes:
SIC Code: 49;1
NAICS Code: 22;11