BAKU, Azerbaijan, February 6. Renaissance Capital investment banking company updates CIS+ countries' overview and forecast for 2024, Trend reports.
According to the company, the CIS+ region continues to show strong economic performance in the face of geopolitical instability and global interest rate increases. Forecasts for 2024 indicate continued strong growth and a solid fiscal and external position. Despite geopolitical risks and commodity price volatility, the region continues to grow due to its economic flexibility, diversified external linkages and favorable demographics.
In 2023, CIS+ economic growth above the long-term average levels projected for 2024 remains strong, exceeding 4 percent year-on-year for five of the six countries. Armenia and Tajikistan lead the way in terms of growth, with expected GDP growth above 8 percent in 2023 and 6.0-6.5 percent in 2024. Azerbaijan is projected to lag behind the regional average, with growth of about 1.0 percent and 2.4 percent in 2023 and 2024, respectively. Medium-term potential growth for most CIS+ countries is estimated at 4-5 percent year-on-year, taking into account catch-up growth in domestic markets and favorable demographics.
The CIS+ region continues to show leadership in containing post-pandemic inflation, noting success in 2023. In Armenia and Georgia, inflation rates have virtually fallen to zero by mid-2023, providing a rationale for interest rates to decline over the next two years from the current 8.75-9.00 percent to 6-7 percent. Kazakhstan, Azerbaijan and Uzbekistan have also reduced inflation to below 10 percent year-on-year by the end of 2023, opening up the potential for further inflation and interest rate reductions in 2024.
The weakening of the Russian ruble in 2023 has put some pressure on the region's currencies, particularly the Uzbek soum, Tajik somoni and Kazakh tenge. However, these currencies are expected to weaken moderately in 2024 against the background of softer fiscal and monetary policies. The Armenian dram remains the region's stable currency, although the Georgian lari may undergo a slight correction due to lower recovering tourism growth.
In a period of elevated global interest rates and growing concerns over debt risks, the CIS+ region remains attractive due to its moderate debt burden and stable fiscal situation. Public and external debt remain at relatively low levels, not exceeding 50 percent of GDP for all countries in the region.
Fiscal deficits remain moderate at 2-3 percent of GDP in five of the six countries except Uzbekistan. Deficits are expected to remain at 2-4 percent in 2024-2025. Azerbaijan, Kazakhstan and Uzbekistan also have significant fiscal reserves to ensure long-term sustainability and finance development.
The CIS+ economies are not under significant debt refinancing pressure in 2024 and continue to have flexible access to financing from various international organizations. Redemptions of sovereign Eurobonds are scheduled for Azerbaijan, Kazakhstan and Uzbekistan in 2024, and for Armenia and Kazakhstan in 2025. Uzbekistan became the first CIS+ country to enter the Eurobond market in 2023 after a hiatus.
After some upgrades in 2022-2023 for Armenia, Azerbaijan and Uzbekistan, the ratings are expected to remain stable in the short term, with potential for improvement in the medium term for these countries, as well as for Georgia and Uzbekistan.
Geopolitical uncertainty remains the main source of risks for the CIS+ countries, and external risks, including those related to Russia, remain, although they seem less pronounced now than a year ago.
