Full Report - Subregional Office for East and North-East Asia - escap

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ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2013 Figure 2.6. Current account balance in North and Central Asian economies, 2010-2012 Percentage of GDP 35 30 25 20 15 10 5 0 -5 -10 -15 -20 Armenia Azerbaijan Georgia Kazakhstan Sources: ESCAP, based on national sources; and International Monetary Fund, International Financial Statistics online database. Available from http:// elibrary-data.imf.org/ (accessed on 30 March 2013); and Economist Intelligence Unit, Country Reports. Note: Data for 2012 are estimates. Kyrgyzstan Russian Federation Tajikistan 2010 2011 2012 Turkmenistan Uzbekistan prices helped to offset to some extent its widening deficit on the services account. FDI remained robust and largely directed towards the oil and gas sector. In Kazakhstan, the current account surplus narrowed to 4.7% of GDP in 2012 from 7.6% in 2011. The country’s persistent services deficit remained substantial, particularly that related to the hydrocarbon sector. In the Russian Federation, the current account remained in surplus at 4% of GDP in 2012. High oil prices were the main reason for the current account surplus as two thirds of export revenue came from oil and gas. Exports of other raw materials and basic manufactures, such as timber, metals and chemicals, accounted for much of the remainder. In Uzbekistan, the current account surplus narrowed to about 4.7% of GDP in 2012, from 5.8% in 2011, as global prices for their commodity exports, such as gold and cotton, declined. Although a fall in global food prices in early 2012 reduced import costs, demand rose for consumer goods and imported inputs for the country’s infrastructure development and housing construction programme. Among net energy exporters, Turkmenistan is the only country in the subregion with its current account falling into deficit in 2012. Gas exports, especially to China, drove export growth and helped in maintaining a large merchandise trade surplus, while continuing rapid growth in imported services generated a sizeable services deficit. In contrast to the healthy external account of the net energy exporters, the net energy importers continued to post large current account deficits in 2012. In Armenia, the current account deficit remained sizeable at 10.4% of GDP in 2012, as the worsening external economic conditions showed no sign of improvement in the trade account or a pickup in remittance inflows from Armenians working abroad. The current account deficit of Georgia also widened in 2012 to 12.7% of GDP from 11.8% of 2011. Export growth slowed sharply as economic conditions in key trading partners deteriorated. Georgia’s ability to attract FDI inflows was also weak in 2012 for the same reason. Although imports of Kyrgyzstan were tempered by falling food prices during the first half of the year, high prices for energy imports and increased demand for consumer goods worked in the opposite direction. International prices for gold have remained high, but a drastic curtailment of output from the domestic gold sector reduced export earnings. This divergence between export contraction and import growth intensified the external imbalance, which resulted in the current account deficit widening to 9% of GDP in 2012 from 6.3% of GDP in 2011. Similarly in Tajikistan, a drop in the global prices of aluminium and cotton 88
MACROECONOMIC PERFORMANCE AND POLICY CHALLENGES AT THE SUBREGIONAL LEVEL CHAPTER 2 reduced export earnings, and increased import demand contributed to a widening trade deficit in 2012. The 2012 current account deficit widened to 5.8% of GDP in 2012, compared with 4.7% in 2011. Future outlook and policy challenges With oil and gas prices continuing to remain high, growth rates in 2013 in most economies are expected to be similar to those in 2012. However, if the euro zone economies suffer further setbacks, growth of the economies in North and Central Asia will slow due to strong economic linkages between the two groups. The economy of the Russian Federation is projected to grow at 3.6% in 2013, slightly up from 2012. Increased oil production in Kazakhstan will push growth to 6% in 2013. In Armenia, Georgia and Tajikistan, export prices and demand will remain subdued, and higher inflation could hold back economic growth. In contrast, GDP growth in Kyrgyzstan is expected to rebound sharply to 7% in 2013 from a low base, driven by a boost to trade and remittances from a pick-up in growth in the Russian Federation and from higher gold production. Gold production and foreign sales of the metal returning to more usual volumes will be key factors if the economy is to keep growing in 2013. In Azerbaijan, hydrocarbon production is expected to stay below the pre-crisis levels, holding economic growth prospects at 1.5% in 2013. Turkmenistan is to a large extent isolated from the direct effects of turbulence on global financial markets and the euro zone crisis. Growth is expected to remain high at 8% in 2013, supported by rising gas exports to China and robust private consumption. Economic growth in Uzbekistan is expected to ease to 7% in 2013. The authorities are likely to retain many regulations on private-sector activity, including currency controls and high tariffs on imports, making it difficult to enhance foreign investment inflows. Ample revenue from commodity exports would further limit the incentive for undertaking far-reaching economic reforms. With most economies in North and Central Asia being landlocked, development of infrastructure is important to further accelerate growth in the subregion Risks for the future derive from uncertainty about commodity exports, as countries in the subregion are highly reliant on exports of oil, gas, metals and other commodities. Despite the recent efforts of Governments to diversify the economies of their countries away from heavy commodity dependence, the subregion as a whole has become more exposed to commodity-related risks as compared with 10 years ago (ESCAP, 2012b). The importance of this long-term challenge is enhanced by the looming prospect of medium-term global economic growth which would dampen global demand and lower commodity prices. Countries must design and, more importantly, implement effectively those policies aimed at reducing their dependency on a few commodity exports, especially during the boom years when fiscal and external positions are still healthy relative to resource-poor economies. Moreover, the subregion needs to make more efficient use of its resources and generate a permanent income stream, rather than rely on a limited stock of resources. Transparency and accountability in decision-making as well as in implementation, which would entail monitoring the extraction of resources and putting in place anticorruption reforms, are also vital. With most economies in North and Central Asia being landlocked, the subregion faces high costs for transportation and the storage of goods. At the same time, however, a geographic feature of the subregion, which is located midway between Asia and Europe, affords an opportunity for it to serve as a transit zone and platform for trade between those two large consumer markets. Therefore, development of infrastructure is important to further accelerate growth in the subregion. Policymakers in the subregion have recognized the importance of being further connected to their neighbours and have embarked on a number of initiatives in this 89
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UNDER EMBARGO UNTIL 03.30 GMT, THUR
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ECONOMIC AND SOCIAL SURVEY OF ASIA
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PREFACE The Economic and Social Sur
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EXECUTIVE SUMMARY FORWARD-LOOKING M
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on education and health. Indebted c
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ACKNOWLEDGEMENTS This report was pr
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CONTENTS Page Foreword ............
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CONTENTS (continued) Page Australia
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BOXES Page A. Forward-looking macro
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FIGURES (continued) Page 1.20. Ineq
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TABLES Page 1.1. Main destination e
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References to dollars ($) are to Un
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ABBREVIATIONS ADB AEC APEC ASEAN AS
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SOURCES OF QUOTATIONS (a) Page 1: a
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WHY FORWARD-LOOKING MACROECONOMIC P
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▲ WHY FORWARD-LOOKING MACROECONOM
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THE STATE OF INCLUSIVE AND SUSTAINA
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DEVELOPMENTAL MACROECONOMICS: THE C
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Turkey Hong Kong, China Tajikistan
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INVESTING IN INCLUSIVE AND SUSTAINA
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Percentage of GDP INVESTING IN INCL
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❚ ❚ ✕❚ INVESTING IN INCLUSI
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207 REFERENCES
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REFERENCES REFERENCES Abdyrasulova
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REFERENCES (2012a). The debate on e
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REFERENCES (2012). World Energy Out
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REFERENCES Ma, K-H (2008). Assessme
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REFERENCES (2011b). Child Poverty i
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REFERENCES United Nations, Economic
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STATISTICAL ANNEX STATISTICAL ANNEX
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STATISTICAL ANNEX Table 2. Poverty
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STATISTICAL ANNEX Table 4. Resource
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STATISTICAL ANNEX Technical notes T
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STATISTICAL ANNEX Source: Barro, Ro
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STATISTICAL ANNEX estimates based o
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This publication may be obtained fr
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READERSHIP SURVEY The Macroeconomic
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Half a decade since the onset of th
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