Country Report Tajikistan March 2009

Outlook for 2009-10

The Economist Intelligence Unit expects Tajikistan to face a growing threat of instability in 2009-10. Given rising economic hardship caused by a slowdown in growth and a fall in remittances, as well as 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. Real GDP growth is forecast to slow to just 1% in 2009, from 7.9% in 2008, as demand weakens in Tajikistan's main export markets, and as domestic industry continues to suffer from problems in the electricity sector. Inflation will slow in 2009, as international commodity prices fall. Despite a 66% increase in prices for natural gas imports in 2009, lower prices for Tajikistan's food and fuel imports will lead to a narrowing of the trade deficit. A fall in domestic demand will also curtail import costs. The current-account deficit is forecast to narrow to around 12% of GDP in 2009, compared with an estimated 15.3% of GDP in 2008. The deficit will come down further in 2010 as export revenue recovers slightly.

The political scene

The president, Imomali Rahmon, has continued his policy of periodic reshuffles and dismissals of senior figures in order to undermine potential rivals and to try to blame economic shortcomings on incompetent or corrupt officials. Curbing what it claims is radical Islamist activity has continued to be a central focus of the legal system. Relations with the US have been strengthened by an agreement to allow the transit of US non-munitions supplies across Tajik territory.

Economic policy

The government has announced that it intends to revise the 2009 budget to take account of the impact the global economic crisis on the Tajik economy. International financial institutions have raised their level of support for Tajikistan. Foreign investors have been increasing their involvement in Tajikistan's hydrocarbons sector.

The domestic economy

Real GDP growth reached 7.9% in 2008, helped by robust expansion in the agricultural sector and in retail trade. Industrial output has suffered from power shortages. Inflation fell towards the end of 2008 and remains on a downward trend. The depreciation of the local currency accelerated in January.

Foreign trade and payments

The foreign trade deficit almost doubled in 2008. Exports of aluminium fell sharply, owing to lower output and unfavourable price trends. A study by the World Bank has highlighted Tajikistan's heavy reliance on remittance inflows.

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