TOPIC OF THE WEEK: Current accounts in the CCA take a positive turn in 2Q25
Poring through BoP data may not be the most exciting thing in economic analysis, including because it is quite backward looking, but in my mostly frontier countries it helps elucidate key insights on the external side. The 2Q25 data for the CCA space has now been published for all economies save for the very interesting case of Kyrgyzstan (I will discuss this separately once it becomes available) and it shows that the regional current account (CA) position improved in the second quarter of the year and moved to a small, yet rare, surplus. Specifically, the CA switched from a minor deficit to a surplus of 0.8 percent of GDP (4-q ma basis). Excluding the only energy exporter in the sample, Azerbaijan, yields a similarly improving picture, with the CA position transitioning from a deficit of 1.4 percent of GDP to a gap of only 0.5 percent of GDP.
As always, there was a significant divergence in individual country performance, but what stands out in particular is the extraordinarily strong CA position of Uzbekistan and Tajikistan in the quarter. The former registered an outlier surplus, while the latter posted a hefty 21.8-percent-of-GDP surplus. It is thus not surprising that it is exactly the currencies of those two countries that have appreciated the most vs. the US$ since the start of the year. In turn, these CA surpluses were generated by copious remittances, chiefly from Russia. The usual suspects of Armenia and Georgia saw large CA deficits (even if they are improving), driven by ample trade gaps and, in the case of Armenia, weak tourist revenues. Azerbaijan continues to enjoy CA surpluses exclusively supported by a robust trade surplus.
All countries have also pressed on with reserve accumulation, with Uzbekistan leading the pack, including because of rising gold prices. However, Armenia, Georgia, Azerbaijan and Tajikistan have also boosted their FX buffers, albeit for different reasons.
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