IMF: Rate of economic growth in Caucasus and Central Asia to hit 5.7 percent in 2011

IMF: Rate of economic growth in Caucasus and Central Asia to hit 5.7 percent in 2011

Azerbaijan, Baku, May 4 / Trend N. Ismayilova /

The rate of economic growth in the Caucasus and Central Asia will amount to 5.7 percent in 2011, the IMF report "Prospects of developing regional economy" on the Middle East and Central Asia said.

"The growth in the Caucasus and Central Asia hitting 6.5 percent in 2010 were higher than expected. The driving force was the exports of commodities and public investments," the report said. "The countries exporting oil and gas had an increase of 7 percent and improved their current account balance by 5,5 percentage points of GDP. Although the growth in oil and gas importing countries was lower (4 percent), their foreign economic position was also strengthened. The higher prices for minerals and metals, as well as the increase in the number of money transfers contributed to this."

The real GDP growth in 2011 is projected at 5.8 percent, the current account surplus - 10.7 percent of GDP in the countries exporting oil and gas and 5,2 percent, and (-10, 4 percent), respectively in the countries importing oil and gas.

According to the information, inflation increases in all countries of Caucasus and Central Asia. On average, its rates in 2010 hit 7.25 percent. According to the forecasts, they will rise in 2011 by reaching 10.1 percent, mainly due to higher prices for food and fuel, and, in some cases, due to the emerging demand pressures. The inflation in oil and gas exporting countries is projected at 9.6 percent this year and 13.2 percent in oil and gas importing countries.

The high inflation negatively affects the poor layers of the population and complicates policy formulation and implementation. The official bodies react by tightening the monetary policy to avoid the consequences of rising the prices on commodities and in some cases use administrative measures to limit price increases, the report said.
According to the information, the plans of the budget consolidation in 2011 in the region are different and are subjected to social pressures exerted to increase spending. The gradual rates of budget consolidation are reasonable in the countries exporting oil and gas and having sufficient budget sphere.

The non-oil deficit will remain significantly higher in 2011 than before the crisis.
The directive bodies should resolve three main urgent problems: increasing inflation, public pressure to increase the cost and poor quality of bank loan portfolios, the report said.

The most important goals for all countries in the medium term prospect are to create jobs and reduce poverty. The progress in this direction depends on creating the adequate social protection systems, enhancing the role of the private sector, diversifying the economy by reducing dependence on natural resources and achieving more significant regional synergistic effects. Improving the business environment by enhancing transparency, improving governance and improving the quality of institutions is an important part of the reform program, the report said.

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