TOPIC OF THE WEEK: CCA Quarterly Outlook
We provide the quarterly update of our country “cheat sheets”. Since we published our 2024 Outlook, which we dubbed “Less growth, less risk”, the evolution of macroeconomic activity has been supportive of the idea of a slightly moderating pace of activity. Still, the start of the year has been strong enough, in particular in Armenia and Azerbaijan, for us to upgrade our 2024 CCA GDP growth to 5.1 percent (4.7 percent previously) vs the 6.3 percent posted last year. We continue to anticipate the strongest showing in Tajikistan and the weakest in Azerbaijan, even though the latter will be the only country to see an acceleration of GDP growth on a low base and higher expenditures on the newly acquired territories.
Inflation remains subdued early in 2024 chiefly on still powerful base effects, mainly food, but we expect a turnaround in most countries around the second quarter of the year. Nevertheless, we see inflation running within CPI targets this year for all countries except Uzbekistan, which has recently introduced utility tariff hikes. Hence, monetary policy easing will continue at a measured pace through the year.
The second pillar of the outlook, i.e., “less risk”, was always bound to be more controversial, in particular given the stalled peace process between Armenia and Azerbaijan and the upcoming Oct parliamentary elections in Georgia. We still hold to our baseline view that no further military escalation between Yerevan and Baku will take place as both parties come around to a formal peace treaty this year. Still, Armenia’s recent sharp changes in foreign policy have weakened its negotiation position, which Azerbaijan has been all too happy to exploit by presenting fresh demands for Yerevan to meet. We feel more confident about the story line in Georgia, where Georgian Dream is in the driver's seat to do very well in the elections.
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