Population 7.964 million
GDP 7.263 US$ billion
@rating
country
Business climate
assessment
| 2010 | 2011 | 2012(e) | 2013(f) | |
|---|---|---|---|---|
|
GDP growth (%)
|
6.5 |
7.4 |
6.8 |
6 |
|
Inflation (yearly average) (%)
|
6.4 |
12.4 |
6 |
8.1 |
|
Budget balance (% GDP)
|
-0.4 |
0.5 |
-0.5 |
0.6 |
|
Current account balance (% GDP)
|
-0.3 |
0.6 |
-0.4 |
-1.5 |
|
Public debt (% GDP)
|
36.1 |
33.3 |
33.9 |
35.2 |
| (e) Estimate (f) Forecast | ||||
STRENGTHS
- Financial support from multilateral international backers and China
- Considerable hydroelectric potential
- Raw materials wealth (aluminium, cotton and minerals)
WEAKNESSES
- Great poverty and institutional weakness
- Risk of destabilisation by Islamists
- Strong state involvement in economic activity
- Dependence on workers’ remittances
- Weakness of foreign currency reserves
Risk assessment
Sustained growth built on expatriate workers’ remittances
Remittances by expatriate workers have returned to their pre-crisis level at more than 40% of GDP, one of the highest levels in the world. While 64% of the population live under the poverty threshold, the consumption of many households depends on this external resource, which is expected to continue in 2013 due to favourable economic conditions in Russia, where 800,000 expatriate workers have been registered. Growth of credit to the private sector is expected to benefit light industry, construction, food processing and services. The aluminium industry, the main source of exports, suffered a fall in exports in 2012. However, the prospects of the state aluminium company, Talco, in 2013 are good and are expected to put an end to 4 successive years of falling production. The price of cotton, the second most important export, will continue to fall confronted by a plentiful global supply, while production volume will depend on weather conditions. Over the medium term potential growth will depend on progress in the construction of the Rogun hydroelectric dam. Begun in the Soviet era, its development is hampered by many political obstacles (access to water for the downstream countries) and the uncertainties concerning finance. Inflationary tendencies will remain strong due to the dependence on imports of food (demographic density in relation to cultivable land among the highest in the world) and energy. Finally drilling for oil will begin in 2013 in order to assess the reserves in the south of the country, the estimated potential of which would make the country the biggest producer in central Europe.
A very fragile financial situation
Tajikistan, the poorest of the former Soviet republics, remains dependent on official aid, notably through the IMF’s $152 million Extended Credit Facility (ECF) granted in 2010. The budget deficit is expected to disappear in 2013, notably because of tax administration reform applicable from 2013. The number of taxes will drop from 21 to 10. This tax simplification should enable a gradual broadening of the tax base. The current account deficit is expected to grow again in 2013 because of the heavy dependence on food and energy imports. The central bank will keep the somoni stable, as in 2012, to limit imported inflation. We note, however, that a marked global economic slowdown could result in a substantial fall in remittances from workers abroad and thus a risk of a depreciation of the currency, in view of the high current account deficit and low foreign exchange reserves. The banking sector remains weakened by the dubious quality of its assets, strong dollarisation and general under-capitalisation.
High political risk and a discouraging business environment for investment
The Tajik population is ethnically fragmented. Although the country has hitherto been spared Islamic fundamentalism, it offers it fertile territory: poverty, unemployment, restriction of liberty, deep geographic divisions and regionalist factions. Tajikistan has for several years become the sanctuary for several armed Islamist groups, among them the Uzbekistan Islamic Movement (UIM), close to Al Qaeda and the Taliban. The security situation will continue to be undermined by the presence of powerful mafia networks organised around trafficking in heroin produced in Afghanistan, 30% of which passes through Central Asia. To curb the Afghan terrorist threat and with the approaching NATO troop withdrawal in 2014, in 2012, the largest Russian division abroad was granted a 49-year extension to stay in the country. President Emomali Rakhmon, who has led Tajikistan since 1994, holds all the power. The risk of political instability is expected to accentuate again with the prospect of the November 2013 presidential elections. Relations with Uzbekistan remain tense and concern mainly the sharing of water resources. The blocking of Uzbek rail freight (the main link for trade and energy supply) constitutes the main threat to the construction of the Rogun dam.
The country’s attractiveness suffers from the ineffectiveness of its public institutions. The tax system is uncompetitive: taxes are too high compared with the regional average, which buoys the informal economy, estimated at over 50% of GDP. Endemic corruption and the proximity of the Afghan conflict zone affect FDIs, which remain at very low levels.
