Tag Archives: economy

Unemployment rate rises in Armenia

JUNE 30 2017 (The Bulletin) — Armenia’s unemployment rate hit 19% in the first quarter of the year, highlighting the impact of an economic downturn. The unemployment rate has risen steadily since 2014. In 2013/14 it hovered between 15% and 16%. Like the rest of the region, Armenia’s economy has been hit by a drop in oil prices that has dragged down the Russian economy.

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

Uzbekistan to rise utility prices

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JUNE 30 2017 (The Bulletin) — Uzbekistan will raise the cost of electricity and gas it supplies to households by 7% from July 15, media reported quoting the state- owned Uzbekenergo and Uzbekneftegas. This is the second utility price rise in less than a year, the uzdaily.uz website reported. The price rise shows the inflationary pressure built into the Uzbek economy. Last month the Uzbek Central Bank increased its key interest rate to try to dampen inflation.

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

GDP grows in Georgia

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JUNE 28 2017 (The Bulletin) — Government spending on infrastructure projects and private sector development have given the Georgian economy a boost and means that it could surpass expectations of GDP growth of 4% this year, economy minister Giorgi Gakharia said in an interview with Reuters. This is important because of all the economies of Central Asia and the South Caucasus, Georgia’s appears to be recovering the fastest from a downturn triggered by a drop in oil prices that hit Russia, the regional economic driver.

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

Tajik CB auctions failed banks property

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DUSHANBE, JUNE 29 2017 (The Bulletin) — Tajikistan’s Central Bank said that it would auction off property belonging to two failed banks Tochprombonk and Fononbonk, a very public humbling for two prominent Tajik financial institutions.

The government withdrew the banking licences for Tochprombonk and Fononbonk on Feb. 24, effectively declaring them bankrupt, having tried to rescue them last year in a $490m bailout of the banking sector. It was more successful propping up Tajikistan’s two main banks, Tojiksodirotbonk and Agroinvestbank, which appear to have survived an economic downturn.

Tajikistan, like the rest of Central Asia, has been grappling with the impact of a collapse in oil prices that triggered a recession in Russia. Russia is the main driver of economic activity in the region and its recession had a heavy knock-on effect in Central Asia, which, to a large extent is reliant on remittances sent back by migrants working in Russia.

The Tajik banking sector has been heavily criticised by international organisations for is weaknesses. In April the Asian Development Bank (ADB) said that the Tajik banking sector needed to improve is transparency and increase capital levels. Last year the IMF said that the banking sector in Tajikistan was “dire”. Bad loans were now over 50% of the total loan portfolio.

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

Business looks good for Kazakhstan’s discount voucher market

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ALMATY, JUNE 26 2017 (The Bulletin) — Chocolife.me, the Kazakh discount voucher company modelled on the US’ Groupon, has bought its rival BeSmart for an undisclosed amount, its CEO, Ramil Mukhoryapov, told The Bulletin in an interview.

In the interview, Mr Mukhoryapov gave an upbeat assessment of the discount market in Kazakhstan, saying that the economic downturn of the past three years had, in some ways, driven growth.

“We feel that the additional trigger was the devaluation. People became a bit poorer and they had more stimulus to save (money through discount vouchers),” he said.

In 2015, the Kazakh tenge lost around 50% of its value. Central Asia and the South Caucasus have been dealing with a sudden drop in the value of oil and gas from 2014 which knocked revenues and triggered a recession in Russia, the region’s economic driver.

Mr Mukhoryapov said, though, that although the collapse of the tenge had hit the US dollar valuation of Chocolife.me, the market had been growing by 25% to 30% a year.

Chocolife.me, and BeSmart, vouchers typically offer discounts on family days out at water parks and funfairs, as well as dental polishing services and manicures.

Combined, the two brands will have a near 100% share of the discount voucher market in Kazakhstan, Mr Mukhoryapov said. He declined to say how much the market was currently worth or how much Chocolife.me, set up in 2011, had paid for BeSmart but he did emphase the role that the business played in the Kazakh economy.

“The market of collective purchases is a very small part of the advertisement market. If we look, what we do is we help advertise, promote (services),” he said.

For analysts, deals in the Kazakh retail market suggest that consumer confidence in Kazakhstan may, just, be beginning to improve.

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

Kyrgyz CB keeps interest rate steady

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JUNE 28 2017 (The Bulletin) — Kyrgyzstan’s Central Bank kept its key interest rate steady at 5% because of rising inflation and economic growth. The rate decision is good news as it will be seen as a positive assessment of the Kyrgyz economy which has been battling against a downturn over the past three years or so. Inflation in Kyrgyzstan is currently running at around 3.8%. At the end of last year it was recording deflation.

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

Currencies: Kyrgyzstan’s som

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JULY 3 2017 (The Bulletin) — The Kyrgyz Central Bank said that the economy was picking up, electing to keep interest rates steady, but Kyrgyzstan’s som currency has continued to fall. It is now trading at around 69.2/$1, its lowest since March. If its drops through the 69.4/$1 barrier it will hit its lowest value since September.

The turnaround in the currency has been startling and highlights just how vulnerable the currencies of Central Asia are to the whims of their governments. Analysts said that the recent drop in the value of the Kyrgyz som from 67.2/$1, its highest level since mid-2015, has been controlled and bears the hallmarks of a managed decline.

Analysts have warned that inflationary pressures have been built into the Kyrgyz economy. A decline in the value of a national currency is one way that inflation seeps out. The Central Bank said that inflation was now around 4.4%, a large jump from the end of last year when it was measuring deflation.

GDP growth for the first five months of the year was over 6%, outpacing expectations.

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

Azerbaijan’s IBA improves restructuring deal

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JUNE 19 2017 (The Bulletin) — The International Bank of Azerbaijan bowed to pressure from its creditors to improve the terms of its proposed restructuring deal.

Essentially the new terms ensure more flexibility for IBA creditors and slightly higher and more frequent interest payments. They had accused the bank of preparing a restructuring programme that favours Azerbaijani debt holders.

IBA has presented different options to creditors holding $3.3b of debt, although the bottom line was that they will lose around 20% of their investments. It had said that creditors could only choose one option although it has now mellowed on this demand.

“The ‘first come, first served’ allocation mechanism has been changed to an 11 business day early bird period,” IBA said in a statement.

IBA said in May that it had missed a deadline to repay a creditor and that it needed to restructure $3.3b of debt. The announcement rocked investors and analysts who have been warning that the Azerbaijani banking system was teetering towards a default.

Bondholders were still sceptical of the new deal, saying that it was not much improved from the original proposition.

The FT quoted Lutz Roehmeyer, a portfolio manager at Landesbank Berlin as saying that he would vote against the new proposal. “International investors can’t understand why an oil-rich country with a huge sovereign wealth fund does not have the money to pay back,” he said.

Other creditors warned that Azerbaijan has damaged its reputation and will find it harder to borrow money in the future and that it needed to do much more to diversify its economy away from oil and gas.

They now have until July 18 to approve the deal.

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(News report from Issue No. 334, published on June 26 2017)

Turkmen economy is ailing

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JUNE 21 2017 (The Bulletin) — Turkmenistan’s economy is stalling and its prospects looking increasingly bad, Radio Free Europe/Radio Liberty reported in a podcast.

Pulling accurate information from Turkmenistan is complicated with most analysts describing GDP growth data permanently showing a 6% expansion as both unrealistic and misleading. Instead they are increasingly following revenue export data which measured $5b last year against $9b in 2014. This gives a rough indication of how much money the Turkmen government, driver of the economy, has to spend.

Energy prices collapsed in 2014, hitting the Turkmen economy particularly hard as it is reliant on gas sales to China.

The US-funded RFE/RL said that the an informal barter economy had grown as cash was in such short supply.

“I would call this a great Turkmen Depression,” said Farrukh Yussupov, head of the RFE/RL Turkmen service. “People are not getting paid for months and at the bazaars not only do you see fewer buyers but today we are reporting that there are no sellers either.”

RFE/RL also said that President Kurbanguly Berdymukhamedov had ordered regional governments to meet their own expenses as central government couldn’t afford to prop them up.

The official rate of the Turkmen manat is 3.5/$1 but sources on the RFE/RL report in Ashgabat said that on the Black Market the manat is trading at around 7/$1.

Earlier this year, Mr Berdymukhamedov ordered his government to cut generous Soviet- era subsidies as a way of saving money, a certain sign that the economy was in trouble.

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(News report from Issue No. 334, published on June 26 2017)

Uzbekistan warns that inflation is accelerating

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TASHKENT, JUNE 24 2017 (The Bulletin) — Inflation in Uzbekistan is accelerating fast, the country’s Central Bank said in a rare statement giving economic guidance.

Uzbekistan is Central Asia’s most populous country and the admission will alarm other neighbouring governments who have been hinting at inflationary pressures built into their economies.

As well as warning of inflationary pressures, Uzbekistan’s Central Bank also said that it was pushing up its key interest rate to 14% from 9%, although it was unclear how much impact this rise would have on an economy underpinned by government support and the Black Market.

“This decision is due to an acceleration of inflation over the past period and the need to limit the increased inflationary risks,” the Uzbek Central Bank said in a statement.

“Along with the seasonal fluctuations and supply factors, inflation has been influenced by monetary factors such as the acceleration in lending of the national currency into the economy and its devaluation compared to previous years.”

The unusually frank guidance from the Central Bank may also be linked to both a change in Central Bank chief and a shift in the Uzbek government’s mindset.

Fayzulla Mullajanov, Central Bank chief since independence from the Soviet Union in 1991 and a relic from a Soviet-tinged bygone era, died in May. Parliament has approved Mamarizo Nurmuratov as his replacement.

Mr Nurmuratov is another long- serving Central Bank insider and had been Mr Mullajanov’s adviser but he may have been told to open up the reclusive institution by President Shavkat Mirziyoyev. Mr Mirziyoyev has appeared determined to open up Uzbekistan since taking over from Islam Karimov in September last year.

The Uzbek Central Bank’s statement also referenced the depreciation of its currency. It has steadily managed a drop in value of the Uzbek soum of around 0.7% per week over the past year. In the last 12 months it has dropped by around a third to trade, officially, at 3,930/$1. On the Black Market, the soum is trading at 8,300/$1, according to uzdollar.com.

Uzbekistan’s economic woes are mirrored across the region. A drop in oil prices in 2014, reduced the value of its gas exports and triggered a recession in Russia. Uzbekistan, like its Central Asian neighbours, relies on Russia as an economic driver, creating jobs and markets. Remittances from Russia have picked up but are still at a third of the level of 2014.

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(News report from Issue No. 334, published on June 26 2017)