世界发展银行-Tajikistan-Country-Economic-Update,-Fall-2020---Economic-Slowdown-Amid-the-Pandemic_26页_1mb

Tajikistan Country Economic Update - Fall 2020

Core Content

This report provides an overview of Tajikistan's economic and social developments in 2020, focusing on the impacts of the COVID-19 pandemic. It outlines the challenges faced by the economy, the government's response, and the outlook for future growth and stability.

Main Points

• Economic Slowdown: The pandemic caused a significant economic slowdown, with real GDP growth dropping to 4.2% year-on-year in the first nine months of 2020, compared to 7.2% in the same period of 2019.
• Sectoral Impact: While agriculture and industry showed resilience with growth rates of 8.1% and 10.7% respectively, the services sector, especially hospitality and tourism, was severely affected with hotel occupancy rates declining by 67%.
• Inflation Trends: Inflation peaked at 10.6% in April 2020 but declined to 8.5% by October. However, the depreciation of the Tajik Somoni created new inflationary pressures.
• Remittances and Exports: Migrant remittances fell by 14.8% year-on-year, affecting household consumption. Gold exports surged, contributing significantly to GDP growth, but other commodity exports declined due to falling international prices.
• Fiscal Response: The government implemented countercyclical fiscal policies, including deferring tax collections, boosting health and social spending, and increasing public sector wages and pensions. The 2020 state budget projected a fiscal deficit of 5.8% of GDP.
• Monetary Policy: The National Bank of Tajikistan (NBT) eased monetary policy by cutting the refinance rate and reducing reserve requirements, aiming to support lending and economic activity.
• Debt and Financing: Tajikistan applied for debt suspension under the G-20 Debt Service Suspension Initiative (DSSI), receiving emergency assistance from the IMF, ADB, and EFSD. Public debt reached 40% of GDP by September 2020.
• Financial Sector Challenges: Non-performing loans increased to 31% of total loans by June 2020, and the financial sector faced heightened market risk due to limited foreign exchange access.

Key Information

Economic Growth and Inflation

• Real GDP Growth: 4.2% in Jan-Sep 2020, down from 7.2% in Jan-Sep 2019.
• Sector Contributions:
  • Agriculture: 2.1% (up from 1.5% in 2019).
  • Industry: 2.1% (down from 3.6% in 2019).
  • Construction: -0.6% (down from -0.7% in 2019).
  • Services: 0.5% (down from 4.1% in 2019).
• Inflation:
  • Peaked at 10.6% in April 2020.
  • Declined to 8.5% by October 2020.
  • Expected to increase to around 10% by year-end due to exchange rate depreciation.

Current Account, Exports, and FDI

• Current Account Deficit: Narrowed to 1.8% of GDP in Jan-Jun 2020 from 7.6% in Jan-Jun 2019.
• Exports:
  • Increased by 54.8% in Jan-Sep 2020, mainly driven by gold exports.
  • Gold accounted for 58% of total exports, valued at $690 million.
  • Non-gold exports dropped by 22.4%.
• Imports:
  • Declined by 6.6% in Jan-Sep 2020.
  • Machinery, equipment, vehicles, and consumer goods were the main categories.
• FDI:
  • Inward FDI fell by over 70% to $59.8 million, or 1.8% of GDP.
  • Mining, manufacturing, and financial intermediation saw the largest drops.

Fiscal and Debt Policies

• Budget Deficit:
  • The 2020 state budget targets a fiscal deficit of 5.8% of GDP.
  • Tax revenues declined by 3.7% year-on-year, with most tax categories underperforming.
• Budget Support:
  • Received TJS 515 million in budget support grants, helping to offset revenue shortfalls.
• Public Debt:
  • Reached 40% of GDP by September 2020, up from 36.6% in 2019.
  • The government plans to consolidate the budget and update its Debt Management Strategy for 2021-2023.

Monetary Policy and Financial Sector

• Monetary Easing:
  • NBT cut the refinance rate by 100 basis points twice, to 10.75%.
  • Reduced reserve requirements for both national and foreign currency deposits.
• Credit Expansion:
  • Credit to the private sector grew by 13.4% in March 2020 but slowed to 6.1% by June.
  • By August, credit growth reached 8.8%.
• Deposits and Liquidity:
  • Household and firm deposits fell in Q2 2020 but recovered by August.
• Non-Performing Loans:
  • Increased to 31% of total loans by June 2020.
  • The capital adequacy ratio slightly dropped to 19.7% by June 2020.

Economic Outlook and Risks

• Growth Outlook:
  • Projected to rise to 3.5% in 2021 and 5.5% in 2022, assuming vaccine availability and recovery in trade and remittances.
• Inflation Outlook:
  • Expected to moderate in the medium term as import prices decline and NBT tightens monetary policy.
• External Risks:
  • High dependence on remittances and commodity exports makes the economy vulnerable to external shocks.
• Domestic Risks:
  • Limited fiscal space, inefficient SOEs, and weak business environment pose challenges.
  • Rising non-performing loans and reduced profitability could strain the financial system.
• Social Impact:
  • A growing share of the population reduced food consumption.
  • 20% of households seeking medical care reported inability to access it.
  • Unemployment increased due to reduced migrant mobility and weakened domestic demand.

Focus Section: Economic and Social Impacts of COVID-19

• Labor Market Recovery:
  • Quick recovery from June to August as lockdowns eased.
  • Vacancies returned to pre-crisis levels by August.
• Persistent Vulnerabilities:
  • Many households still face job disruptions, with some fearing permanent job losses.
  • Food insecurity remained high, above 2019 levels.
• Healthcare Strain:
  • The healthcare system faced unprecedented pressure due to the surge in patients.
  • The government expanded social assistance programs to cover more districts.
• Social Assistance:
  • Targeted assistance of TJS 400 per year for eligible families, expected to increase to TJS 464.
  • One-time assistance of TJS 500 provided to vulnerable groups.
• Long-Term Challenges:
  • The link between GDP growth and job creation remains weak.
  • Poverty alleviation prospects have weakened due to the pandemic.
  • Structural reforms in SOEs and the private sector are needed for long-term growth.

Conclusion

The pandemic significantly impacted Tajikistan's economy, leading to a slowdown in growth, increased inflation, and severe social consequences. The government's response included fiscal and monetary easing, increased social spending, and debt suspension initiatives. While recovery is expected in 2021, the country remains vulnerable to both external and domestic risks, emphasizing the need for continued support and structural reforms.