March 2021. Republic of Tajikistan: Social and economic development in 2020 and medium-term prospective

04 June 2021

The COVID-19 pandemic led to a slowdown in economic growth in Tajikistan to 4.5% against 7.5% a year earlier, however, due to the lower spread of the virus in the republic than expected, most economic indicators showed more favorable dynamics than expected at the beginning of the crisis. Despite the reduction in government revenues, the budget deficit remained practically unchanged, due to the reduction in non-priority spending. The improvement in the trade balance, driven by lower consumer and investment imports, as well as strong growth in gold exports, led to a current account surplus despite a decline in remittance inflows. Together with a significant amount of attracted donor assistance, which compensated for the outflow of foreign investment, this ensured a positive balance of payments and contributed to an increase in the level of government reserves. Easing monetary policy had a limited effect on supporting economic growth and contributed to the persistence of a high inflationary background, however, at the same time, it had a beneficial effect on the stability of the banking sector. The baseline forecast for the medium term assumes that pre-crisis growth rates will recover in 2021 and gradually slow down in the future amid conservative monetary and fiscal policies.