Tag Archives: economy

Moody downgrades Kazakh sovereign debt

APRIL 22 2016 (The Conway Bulletin) – Ratings agency Moody’s downgraded Kazakhstan’s sovereign debt rating to Bbb3 from Bbb2 and gave it a negative outlook because of sustained low oil prices and a currency devaluation last year which is said had weakened Kazakh banks. Moody’s said: “The negative outlook reflects ongoing pressure on the banking sector’s solvency, which also constrains the growth outlook and poses financial and fiscal risks.”

ENDS

(News report from Issue No. 278, published on April 29 2016)

Banking activity drops in Georgia

APRIL 25 2016 (The Conway Bulletin) – Data from Georgia’s Central Bank showed savings held in Georgian banks dropped by 2.4% between February and March. At the end of March, Georgia’s commercial banks held 24.7b lari, a drop of 800m lari. This is the lowest savings level since November last year. The Central Bank is concerned that inflation has slowed. Like the rest of the region, Georgia has been vulnerable to a fall in its lari currency.

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(News report from Issue No. 278, published on April 29 2016)

Georgia cuts interest rate for the first time in 3 years

TBILISI, APRIL 27 2016 (The Conway Bulletin) — Georgia’s Central Bank cut its key interest rate for the first time in three years, performing a policy U-turn designed to boost its flagging economy.

It cut its key refinancing rate by 50 basis points to 7.5%, having steadily raised it from 4% throughout 2015. It said this was the first step towards a rate of around 5 or 6%.

“The Monetary Policy Committee considers it necessary to start phasing out the tight monetary policy, which means the gradual reduction of the refinancing rate down to the neutral level in the medium-term,” the Central Bank said in a statement.

“The rate of further monetary policy softening will depend on the revised inflation forecasts.”

In March, annualised inflation fell to 4.1% from 5.6% in February.

The Central Bank also dropped the lari-denominated minimum capital requirements for its commercial banks from 10% to 7% and increased the US dollar-denominated requirements.

It did this to try to push more lari into circulation and to take the US dollar off the market.

Alongside the less-than-rosy economic news, the Central Bank said that there had been signs of improved economic activity, especially in construction, but that high interest rates and other issues were a brake on potential growth.

“Another factor keeping the economic growth low is the negative impact of the economic situation in Georgia’s trade partners, reflected in the decrease of remittances and weakening of external demand,” it said.

Russia and Greece have traditionally been Georgia’s main source of remittances. Russia is currently in a recession linked to low global oil prices and Western imposed sanctions. Greece’s economy remains in recovery-mode after the impact of the 2008/9 Global Financial Crisis.

Like inflation, GDP growth has also been sluggish. The Statistics Committee said GDP grew by 2.3% in Q1, one percentage point slower than the expectations. The Central Bank expects 3% GDP growth in 2016.

ENDS

(News report from Issue No. 278, published on April 29 2016)

Editorial: Georgia’s Central Bank

APRIL 29 2016 (The Conway Bulletin) – Georgia’s Central Bank sounded confident in its review of the country’s monetary policy, but looking at the data, the cheers are a bit more muted.

Yes, high interest rates have curbed inflation and stabilised the lari exchange rate — together with a few interventions in the currency market, that is — but economic activity and GDP growth have suffered.

The Central Bank has now hinted that the country needs to reach a new normal and said it will lower interest rates further in the next months.

Should Georgia be able to weather what analysts deem to be the last months of a two-year crisis, it could see growth pick up again in 2017.

The crucial issue, though, is how to boost the economy without pushing inflation too high.

Georgia is moving towards a more West-friendly economic environment, changing the tax code and giving incentives to foreign companies looking to set up shop in the country.

Both the IMF and the government now hope that their bet on the neo- liberal model will work.

ENDS

(Editorial from Issue No. 278, published on April 29 2016)

IMF schedules mission to Tajikistan

APRIL 28 2016 (The Conway Bulletin) – The IMF said it will send a mission to Tajikistan in the next few weeks to work on a programme that could lead to a bailout, the FT reported. The IMF had previously offered help to Tajikistan, provided the government embraces a series of proposed reforms. Tajikistan has been hit hard by a regional economical downturn that has crashed into currencies and knocked out vital remittance flows from Russia.

ENDS

(News report from Issue No. 278, published on April 29 2016)

GDP to shrink in Kazakhstan

APRIL 21 2016 (The Conway Bulletin) – Ratings agency Fitch said Kazakhstan’s GDP will shrink by 1% in 2016 and the value of assets owned by Samruk-Kazyna, the country’s sovereign wealth fund, will decline by $3b, or 5%. Fitch’s accounting is more pessimistic than previous government calculations, which forecast marginal GDP growth for 2016.

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