Middle East and Central Asia > Afghanistan, Islamic Republic of

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International Monetary Fund. Middle East and Central Asia Dept.

Abstract

A fragile recovery continues in the Middle East and Central Asia region. The region has made good progress since the beginning of the year, but new challenges have emerged. They include a pandemic wave in countries with weak vaccination progress and rising inflation, which has contributed to declining monetary policy space, adding to the difficulties posed by limited fiscal policy space. Additionally, divergent recoveries and concerns about economic scarring persist. Inequities are also on the rise, and countries will need to tackle the pandemic’s impact on debt, labor markets, and the corporate sector. Countries will face difficult tradeoffs amid this challenging environment as they continue to manage the current crisis. Ramping up vaccine acquisition and distribution remains the most urgent short-term priority. Additional support should be well targeted, and central banks may need to raise interest rates if inflation expectations start to increase. Improving policy frameworks will be important to reduce policy tradeoffs. Preparing for a new chapter by investing in a transformational recovery will be vital to the region’s future. Important priorities include reorienting the role of the state toward health, education, and social safety nets; leveraging global trends like digitalization; and investing in climate-resilient technology.

International Monetary Fund. Middle East and Central Asia Dept.
Tajikistan successfully completed a 3-year ECF-supported program in May 2012 and needs to continue with ambitious reforms. While growth is robust, it is non-inclusive, leading to large-scale outmigration that makes Tajikistan the most remittance-dependent country in the world. The country remains the poorest of the eight in the Caucasus and Central Asia (CCA) and stands next to last among the seven with rankings in the ease of doing business. Reliance on commodity imports, a narrow export base, and low buffers leave the economy vulnerable. Weak macroeconomic policy frameworks restrict the authorities’ ability to dampen shocks. State-directed lending and investment displace market-financed activity and create fiscal risks. Presidential elections are scheduled for November.
Oya Celasun, Jungjin Lee, Mr. Mico Mrkaic, and Mr. Allan Timmermann
This paper examines the performance of World Economic Outlook (WEO) growth forecasts for 2004-17. Short-term real GDP growth forecasts over that period exhibit little bias, and their accuracy is broadly similar to those of Consensus Economics forecasts. By contrast, two- to five-year ahead WEO growth forecasts in 2004-17 tend to be upward biased, and in up to half of countries less accurate than a naïve forecast given by the average growth rate in the recent past. The analysis suggests that a more efficient use of available information on internal and external factors—such as the estimated output gap, projected terms of trade, and the growth forecasts of major trading partners—can improve the accuracy of some economies’ growth forecasts.