Real GDP growth is projected to reach 4.2 percent in 2022, and to slow to an average of 2.7 percent during 2023-24, Report informs referring to an updated WB report “Social Protection for Recovery: Europe and Central Asia (ECA) Economic Update.”
“A moderate decline in crude oil production is expected to be offset by expansion in natural-gas production, with growth in the energy sector stabilizing at 0.1 percent. In non-energy sectors growth is projected to average 4.6 percent during 2023-24 as service sectors’ growth will converge to the pre-COVID levels. On the demand side, consumption is expected to moderate as households’ real incomes are negatively affected by high inflation, and investments are projected to moderate,” reads the report.
Inflation is projected to ease in 2023 and 2024, while remaining significantly above the CBA’s target range of 4+/-2 percent, and is expected to have negative distributional impacts, as the less well-off are disproportionately affected.
“High energy prices in the medium term are expected to bolster the external sector, with the current account surplus remaining in double digits. Export growth will remain strong, propelled by high prices, while import growth is expected to ease beyond 2022, in line with the moderation in domestic demand,” the WB noted.
The fiscal surplus is projected to moderate gradually over 2022-2024, reflecting the projected path in oil and gas revenues. The new fiscal rule should help to avoid pro-cyclicality during the current commodity boon while reducing non-oil fiscal balance in the medium term.
Implementation of the new socio-economic development strategy is likely to require additional public spending in certain areas, which will need to be reconciled with the fiscal rule.
There are upside risks to the outlook such as the possibility to ramp up natural gas production, enabled by the MoU signed with the EU, and the possible adoption of reforms to foster non-oil sector growth in line with the new socio-economic development strategy.