Tag Archives: economy

Currencies: Uzbekistan’s soum

JULY 27 2017 (The Bulletin) — So, it looks like we already have the big currency story of the year for the region. At least, that is, unless something goes terribly wrong with some of the more wobbly currencies out there – mentioning no names – Azerbaijan, Turkmenistan and even Kazakhstan.

The IMF returned from a mission to Tashkent saying that the government there was fully intending to relax currency exchange regulations that have strangled foreign investment. The official rate of the Uzbek soum is now just over 4,000/$1. The unofficial rate is more than double. How they merge is going to be the story to watch.

In the meantime, if anybody has missed it, it is clear that the Uzbek Central Bank has been managing a steady devaluation of its currency. The chart below shows the steps it has been making to devalue it – by more than 25% since the end of January.

On the equities front, KAZ Minerals continues to outperform, mainly because of another surge in copper prices.

ENDS

(News report from Issue No. 337, published on July 27 2017)

Kazakhstan’s GDP rises

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JULY 23 2017 (The Bulletin) — Spurred on by an increase in mining and metals output, Kazakhstan’s economy grew by 4.1% in the first half of the year compared to the same period in 2016, economy minister Timur Suleimenov said. The Kazakh government has been desperate to present a rising GDP number after three years of stagnation following a collapse in oil prices in 2014 and a recession in Russia.

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(News report from Issue No. 337, published on July 27 2017)

Russian tourists flock to Georgian breakaway region of Abkhazia

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SUKHUMI/Georgia, JULY 16 2017 (The Bulletin) — Russian tourists are flocking to beach resorts in Abkhazia at a greater rate than ever before, giving the breakaway Georgian region an economic boost.

Russian couples walk along Sukhumi’s beachfront promenade and sip Abkhaz wine in newly renovated restaurants. Russian is the main language heard on the streets, shops are filled with Russian products and Russian newspapers are available in local newsagents. The currency used is the Russian rouble.

Abkhazia looks, feels and sounds like a piece of Russia and local residents are, mainly, grateful.

A tourist guide in Novy Afon, around 20km north of Sukhumi told the Bulletin : “Thank God there are the Russians. Not only did they save us when the Georgians wanted to exterminate us but now they make our economy run through tourism.”

It declared independence from Georgia in 1992, triggering a war that killed and displaced thousands of people and lead to a de facto independence. In 2008 after a war with Georgia focused on its two rebel states of Abkhazia and South Ossetia, Russia recognised them as independent. Only a handful of other countries looking to curry Russian favours followed.

Moscow subsidises Abkhazia’s state budget and has thousands of troops permanently deployed in the region.

Other than the military and the breakaway region’s administration, bankrolled by the Kremlin, there are few other jobs in Abkhazia, making Russian tourists so important.

And they are coming in their thousands, all via a border crossing with Russia to the north. Last year Avtandil Gartskiya, the tourism minister told the New York Times in an interview that he expected 1.5m tourists per year, up from less than 100,000 a decade ago.

By contrast, references to Georgia have been eradicated, or nearly.

The cuisine gives away Abkhazia’s Georgian connection. Georgia’s food icon, the Ajarian Khachapuri, a boat shaped crusty bread filled with melted cheese and egg, is a firm favourite with the Russian tourists. It’s been subjected to a rebrand, though, and is called ‘lodochka s yaizom’. In English, this simply means ‘boat with egg’.

ENDS

(News report from Issue No. 336, published on July 16 2017)

Currencies: Kazakhstan’s tenge

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JULY 16 2017 (The Bulletin) — The Kazakh tenge has now fallen to its lowest level since January, giving up most gains it had made this year.

By July 14 it was trading at $327.91/$1, down 2.3% since July 3. At its year peak on May 25, the tenge had traded at 310.65/$1. This means that it has fallen by 5.5% in around seven weeks.

A fluctuating oil price is likely to have had little impact on the value of the tenge. It has been hovering between $50 and $45 per barrel for some time. Instead, commentators have pointed to weak Kazakh fundamentals which suggest that the economy is still in poor shape.

Most worryingly amongst this economic data is the bad debt ratio that banks have built up. It just seems to be getting bigger and the government is preparing a bailout.

ENDS

(News report from Issue No. 336, published on July 16 2017)

State salaries and pensions to rise by 10% in Turkmenistan

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JULY 8 2017 (The Bulletin) — Apparently looking to bolster his support from ordinary Turkmen during a sustained economic downturn, President Kurbanguly Berdymukhamedov ordered state pensions and salaries to be increased from Jan. 1 2018. Analysts have said that the Turkmen economy is under increasing pressure and that inflation is rising fast.

ENDS

(News report from Issue No. 336, published on July 16 2017)

Turkmen President wants faster import substitution programme

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JULY 12 2017 (The Bulletin) — At a government meeting focused on the economy, Turkmen president Kurbanguly Berdymukhamedov told his ministers to speed up the diversification of the economy and especially an import substitution programme that it has been working on. The media report of the meeting betrays, perhaps, Mr Berdymukhamedov’s nervousness at the state of the Turkmen economy. It has been hit by a regional economic decline.

ENDS

(News report from Issue No. 336, published on July 16 2017)

Turkmen President sacks finance minister

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JULY 11 2017 (The Bulletin) — Turkmen president Kurbanguly Berdymukhamedov sacked Mukhametguly Muhammadov as finance minister in yet another public dressing down for a senior government official. Mr Berdymukhamedov has sacked almost his entire government over the past year in what analysts have said is an attempt to deflect blame for Turkmenistan’s stuttering economy.

ENDS

(News report from Issue No. 336, published on July 16 2017)

Foreign investment climate in Georgia is worsening says business group

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TBILISI, JULY 3 2017 (The Bulletin) — The foreign investment climate in Georgia is deteriorating at a rapid rate because of the unscrupulous use of the courts, the influential Georgia International Chamber of Commerce (GICC) said in a statement after its AGM.

The GICC was careful to say that it thought that Georgia’s government was a positive influence on the business climate but that there were other forces and influences that were dragging it down.

“On the other hand (there is) a negative and destructive power represented by ‘uncontrolled elements’ from both in and out of state structures who do not report to the Head of Government and on whom government has no control,” it said in a statement.

Specifically, the IGCC said that unscrupulous officials, police and other officials “scam foreign businesses, expropriate them, steal their lands and their businesses.”

The criticism is a rare blow to Georgia’s reputation as a place to do business. It is more usually associated with positive criticism, relative to the rest of the region. The Georgian government has not responded.

Direct foreign investment is a vital inflow of cash for the Georgian economy. FDI measured $1.65b in 2016, double the inflow of 2010 but down on 2007 when inflows measured over $2b. A war with Russia in 2008 dented Georgia’s FDI pull.

The IGCC referenced fines handed out by a Tbilisi city court against Philip Morris, the US cigarette maker, and British American Tobacco this year as bias against foreign companies.

ENDS

(News report from Issue No. 336, published on July 16 2017)

Uzbekistan allows currency liberalisation

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JULY 7 2017 (The Bulletin) — Uzbekistan has allowed a handful of banks to trade its soum currency at its market rate, Reuters quoted two officials as saying, part of a plan promoted since the death last year of Islam Karimov to liberalise its currency. Currently, investors have to buy soum at an official rate of around 4,000/$1 compared to an unofficial rate of around 8,500/$1. Foreign investors have said that Uzbekistan’s dual currency scheme is a major drawback for its investment climate.

ENDS

(News report from Issue No. 336, published on July 16 2017)

Armenia’s CB keeps interest rates steady

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JUNE 27 2017 (The Bulletin) — Armenia’s Central Bank kept its key interest rate unchanged at 6%, holding true to is assessment earlier this year that it would stop its easing cycle to ward off a potential jump in inflation. Armenia had been measuring deflation until the start of this year when it said that the economy had turned a corner and that prices were now rising. It had steadily slashed its interest rate from 10.5% in 2015 to 6% in February 2017.

ENDS

(News report from Issue No. 335, published on July 3 2017)