Tag Archives: economy

Currencies: Kazakhstan’s tenge, Azerbaijan’s manat

JULY 1 2016 (The Conway Bulletin) – Since mid-2014, a strong US dollar and downward pressures on oil prices have hit economies across Central Asia and the South Caucasus.

Currencies in the region suffered and, despite all the efforts from Central Banks to keep the exchange rate steady by intervening in the market, the fall was inevitable.

Compared to two years ago, all currencies have lost between 15% to 50% of their value. Oil exporting countries (in green in the graph) have fared worse than oil importing countries (pictured in red).

The Kazakh and Azerbaijani Central Banks decided to abandon the currency peg to the US dollar in 2015, causing a plunge in the value of the tenge and the manat. In 2015, these two were among the worst-performing cur- rencies in the world, not just the region.

Oil importers have acted in the opposite direction. In Georgia and Kyrgyzstan, currencies stabilised in the second half of 2015 and Central Banks have tightly controlled exchange rates since.

ENDS

(News report from Issue No. 287, published on July 1 2016)

Business comment: Big Projects

JUNE 29 2016 (The Conway Bulletin) – Azerbaijan may resume its dream of building a mega petrochemical processing complex in an effort to revive its oil and gas sector. This alone is good news for the economy of Azerbaijan, which is poised to see its GDP shrink this year for the first time in two decades.

The intent of SOCAR, the state-owned energy company, is to salvage the project, which it had effectively abandoned in February, after its initial investors had either pulled out or stalled financing.

This is the effect of sustained low oil prices. Besides shying away from upstream exploration and production for costly fields, oil and gas companies have also been forced to rethink their plans for downstream processing facilities.

The project initially included an oil refinery, for a total cost of $16.5b. After scrapping parts of the complex, including the refinery, and downsizing the gas processing facility, the project’s price tag fell to around $4b, a cost that Chinese and Russo- Italian ventures, the new potential investors, now deem feasible.

This is a common problem. Big projects have had to face both the doubts of investors in a low oil price era and the protests of locals, who would rather see resources allocated to combating the enduring crisis.

In January, South Korea’s LG pulled out of a project to build a $4.2b petrochemical plant in Kazakhstan, Russia fled an investment to build a $2b hydropower project in Kyrgyzstan, and Azerbaijan seemed to have abandoned hopes for its project.

As oil prices timidly pick up again, Azerbaijan’s announcement that the project might still see the light could potentially lure investors, who had kept themselves at arm’s length from the rather toxic market it had become in the past two years.

ENDS

(News report from Issue No. 287, published on July 1 2016)

Editorial: Tajik electricity production

JUNE 24 2016 (The Conway Bulletin) – Tajik President Emomali Rakhmon said that he wanted to triple Tajikistan’s power generation capacity to around 45b kWh/year by 2030.

This is a long-term projection, and plenty can happen over the next 14 years, especially in Tajikistan, but it is still an important one. It is important because it shows the impact that the World Bank sponsored CASA-1000 project is having on the aspirations of Tajikistan.

Tajikistan needs to boost its exports and electricity production, through its network of hydropower stations, has emerged as the only real way of doing this. Gold production, while increasing, is still low, hopes of an oil boom spurred by the discovery of Bokhtar field have fallen flat.

But CASA-1000 has encouraged positive talk of a boom in power generation in Tajikistan. It’s important, too, to credit Tajikistan, over Kyrgyzstan, of being hard-headed about power generation. It will supply the lion’s share of the power for the CASA-1000 project, which will send electricity across Afghanistan to Pakistan, and plans to boost its power generation capacity even further show that the potential is there for more.

ENDS

(Editorial from Issue No. 286, published on June 24 2016)

Kazakhstan fines ArcelorMittal

JUNE 17 2016 (The Conway Bulletin) – Steel producer ArcelorMittal Temirtau received a fine of 3.4m tenge (around $10,000) from the Kazakh government for failing to comply with its 2014 investment plan. The company, a subsidiary of Indian giant ArcelorMittal, operates the biggest steel producing plant in Central Asia. Slower demand for steel had forced the company to cut back investment and lay off workers in 2014. It had hoped that the reemergence of Iran into the international economy would boost sales.

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(News report from Issue No. 286, published on June 24 2016)

Utility cost rise in Armenia

JUNE 17 2016 (The Conway Bulletin) – Armenia’s state regulator said it will consider a 5% reduction in the price it charges homes for electricity, currently in the 38.8 – 48.8dram range (8-10 cents), adding to the deflationary pressure in the economy. In April, Russia’s Gazprom agreed to apply a 9% discount to the gas it supplied to Armenia. Rising electricity costs for households had sparked a popular protest in the summer of 2015.

ENDS

(News report from Issue No. 286, published on June 24 2016)

Deficit grows in Azerbaijan

JUNE 20 2016 (The Conway Bulletin) – Azerbaijan’s Central Bank published economic data that highlighted a current account deficit and a drop in FDI for Q1 2016, compared to the same period last year. This is the second consecutive quarter that Azerbaijan has run a trade deficit. Statistical projections say that Azerbaijan will face an economic recession in the first half of the year.

ENDS

(News report from Issue No. 286, published on June 24 2016)

Business comment: BREXIT, Oil & Crisis

JUNE 24 2016 (The Conway Bulletin) – As the results of the referendum on Britain’s EU membership came in early on Friday, the decision to leave the EU has shaken the global market.

The Leave vote has hit the London stock market, where most of the companies focusing on Central Asia and the South Caucasus are listed. Economists now expect more volatility in the short term for the London Stock Exchange.

The so-called Brexit also negatively affected oil prices, sending both Brent and WTI down by 6% in just a few hours. Analysts have said that the period of uncertainty regarding oil prices will now last longer.

Currency markets were also hit, as the British pound lost value against the US dollar, effectively strengthening the greenback.

This had an immediate domino effect on currencies across Central Asia and the South Caucasus, where local currencies weakened against the US dollar.

The increasing uncertainty and volatility is now poised to harm, at least in the short term, local markets in the region, prompting elites in from Tbilisi to Astana to brace for more tough times. It will also hit global markets in general, forcing investors to flee to safety and this means missing out Central Asia and the South Caucasus.

Now both the Fed in the US and the Bank of England will have to revise their economic policies and this is likely to insulate further their economies and pull investment back from Emerging Markets.

In these uncertain times, countries in Central Asia and the South Caucasus cannot but hope that Western investors will go against the tide and continue investing in the region.

ENDS

(News report from Issue No. 286, published on June 24 2016)

Tajik President sets power output goal

JUNE 21 2016 (The Conway Bulletin) – Tajik President Emomali Rakhmon said electricity generation in his country will grow by three times by 2030. Mr Rakhmon set the power output goal at 45b kWh/year, compared to 17b kWh last year. In addition, Mr Rakhmon said the country’s export potential will grow to 10b kWh/year. Tajikistan is tasked with generating most of the electricity for the CASA-1000 power transmission line to Pakistan.

ENDS

(News report from Issue No. 286, published on June 24 2016)

Georgia’s GDP rises

JUNE 20 2016 (The Conway Bulletin) – Georgia’s GDP grew by 2.6% in Q1 2016, driven by an increase in mining and construction activity, the Georgian Statistics Committee, Geostat, said. Large infrastructure projects have boosted Georgia’s GDP growth, which is still below the government’s expectation of full-year growth of 3%.

ENDS

(News report from Issue No. 286, published on June 24 2016)

IMF approves loans for Kyrgyzstan and Armenia

JUNE 16/17 2016 (The Conway Bulletin) – The IMF approved two loans to Armenia and Kyrgyzstan, part of a three-year plan to support macroeconomic reforms. It loaned $22m to Armenia, where it supported a controversial tax reform that received a first parliamentary approval on June 15. The IMF also gave a $13m loan to Kyrgyzstan and lauded the government’s measures to boost tax revenues and cut spending.

ENDS

(News report from Issue No. 286, published on June 24 2016)