recovery in remittance inflows, and a pickup in private investment and con- TAJIKISTAN Key conditions and sumption supported this rebound. Tajikistan's external position improved challenges considerably from higher export prices for metals and mineral products and remit- Table 1 2021 Tajikistan remains the poorest economy in tance inflows. The current account was in Population, million 9.8 Central Asia, with a narrow export base, surplus of about 1 percent of GDP in 2021, GDP, current US$ billion 8.7 structural bottlenecks for job creation, and compared to a surplus of 4.1 percent in GDP per capita, current US$ 896.9 high dependence on external financial aid. 2020. Precious metal exports reached $897 a 4.1 International poverty rate ($1.9) Per capita income (GNI, Atlas method) was million and were about 40 percent of total a 17.8 about US$1,100 in 2021–slightly above the merchandise exports. Increased remit- Lower middle-income poverty rate ($3.2) a 50.5 lower-middle-income threshold. The tances and foreign direct investment (FDI) Upper middle-income poverty rate ($5.5) Gini index a 34.0 poverty rate fell from 17.8 percent in 2015 inflows stimulated consumer and capital School enrollment, primary (% gross) b 100.9 to about 13.9 percent in 2021. goods imports. Higher Chinese mining b 71.1 Tajikistan's economy relies heavily on pri- sector investments doubled FDI to $62.3 Life expectancy at birth, years mary commodity production and exports, million (0.7 percent of GDP) during the Total GHG Emissions (mtCO2e) 16.9 with limited economic diversification. Do- first nine months of 2021. Strong foreign Source: WDI, Macro Poverty Outlook, and official data. mestic investment and consumption de- exchange inflows, including from the is- a/ Most recent value (2015), 2011 PPPs. b/ WDI for School enrollment (2017); Life expectancy pend heavily on migrant remittances, suance of new Special Drawing Rights (2019). which are about a third of GDP, thus leav- (SDR) by the IMF, supported a stable ex- ing the economy highly vulnerable to ex- change rate and allowed international re- ternal shocks. Sanctions on the Russian serves to grow to about 8 months of import The fallout from Russia's invasion of economy have exposed this vulnerability cover by end-2021. Ukraine will lead to an economic con- since Russia is the largest employer of Tajik After a fiscal expansion in 2020, the gov- migrant workers and is among the largest ernment began to consolidate spending in traction of about 2 percent in 2022. A trading partners. 2021. The fiscal deficit narrowed to 1.5 per- projected 40 percent fall in remittances, Reforms aimed at private sector cent of GDP from 3.1 percent in 2020. The higher food and energy prices, and fi- growth, public sector efficiency, and expiration of anti-pandemic tax reliefs, a nancial services and trade disruptions greater inclusion are vital to further rebound in economic activity, and high ex- economic development. port prices increased fiscal revenues. De- will lower household incomes and in- velopment partner loans for infrastructure crease poverty. Fiscal space, already con- projects helped bridge the fiscal gap. Al- strained by structural impediments to though a stable exchange rate and a re- private sector growth, is further limited Recent developments bounding economy helped reduce public by rising debt distress risks from a and publicly guaranteed debt to 42.9 per- Real GDP growth rebounded to about cent of GDP in 2021 (from about 50 percent weakening exchange rate. 9.2 percent in 2021, after slowing to 4.5 in 2020), Tajikistan remains at high risk of percent in 2020 due to COVID-19. A debt distress given its high vulnerability to sharp increase in precious metal exports, external shocks. FIGURE 1 Tajikistan / Fiscal balance and public debt FIGURE 2 Tajikistan / Actual and projected poverty rates and real GDP per capita Percent of GDP Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) -1.5 50 80 900 -1.7 49 800 70 -1.9 700 48 60 -2.1 600 47 50 -2.3 500 -2.5 46 40 400 -2.7 45 30 300 -2.9 44 20 200 -3.1 43 10 100 -3.3 0 0 -3.5 42 2007 2009 2011 2013 2015 2017 2019 2021 2023 2019 2020 2021 2022 2023 2024 International poverty rate Lower middle-income pov. rate Fiscal Balance (LHS) Public Debt (RHS) Upper middle-income pov. rate Real GDP pc Sources: TajStat, World Bank staff estimates. Source: World Bank. Notes: see Table 2. MPO 39 Apr 22 In response to rising food and fuel price in- poverty rate fell to 13.9 percent, and few- The poverty rate is expected to increase flation, the central bank increased its pol- er households reported cutting their food to 14.3 percent in 2022 from 13.9 percent icy rate four times from 10.75 at end-2020 consumption in 2021. in 2021, with the potential for significant to 13.25 percent by the end-2021. Never- To support the most vulnerable groups, further increases in poverty should more theless, average annual inflation rose from the government provided social assistance risks materialize. 8.6 percent in 2020 to 9 percent in 2021. to 238,000 families and provided extra one- The contraction of economic activity due Amidst lower remittances and a weaken- off emergency nutrition-sensitive transfers to the war in Ukraine and a new tax ing ruble following Russia's invasion of to over 164,000 families with children. code introduced at the beginning of the Ukraine, the authorities allowed the year are expected to lower tax revenues somoni to depreciate by 13 percent against in 2022. This, along with an anticipated the US dollar in March 2022. anti-crisis spending increase, is projected Financial sector performance improved in Outlook to increase the fiscal deficit to about 3.4 2021 - primarily due to liquidation being percent in 2022. initiated for four insolvent banks (includ- Russia's invasion of Ukraine will lead These projections are subject to substantial ing two state-owned banks). The share of to a contraction of Tajikistan's economy domestic and external downside risks. En- non-performing loans in the total lending by about 2 percent in 2022. The main during sanctions on Russia could create portfolio declined by 10 percentage points driver of this contraction is a projected significant challenges for migrant workers to 13.7 percent in 2021. 40 percent fall in remittances, which is and further reduce demand for Tajik ex- In the Fall 2021 round of the World expected to lead to sharply lower pri- ports. Other risks include the re-emer- Bank's Listening to Tajikistan survey, the vate consumption and investment. Oth- gence of new pandemic waves, new border share of households with at least one er factors, including high prices, disrup- conflicts with the Kyrgyz Republic, and labor migrant abroad went up from 29 tions to trade, and the financial system, the spillover of security risks from percent to 44 percent, remittance income are also expected to contribute to the Afghanistan. In addition, institutional from 10 percent to 18 percent, and wage contraction. High global food and fuel challenges to private sector development income from 11 percent to 21 percent prices are projected to lead to double- and job creation weigh heavily on the compared with 2020. As a result, the digit inflation in 2022. country's growth prospects. TABLE 2 Tajikistan / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2019 2020 2021e 2022f 2023f 2024f Real GDP growth, at constant market prices 7.4 4.5 9.2 -1.8 3.2 3.8 Private Consumption 7.1 -4.4 4.6 -10.0 3.0 5.0 Government Consumption 3.5 0.4 7.8 -0.4 1.3 2.9 Gross Fixed Capital Investment -6.4 -6.6 4.0 -9.7 6.7 5.5 Exports, Goods and Services 3.5 9.6 18.3 0.0 3.5 3.7 Imports, Goods and Services 2.2 -2.8 11.5 -5.0 0.2 0.5 Real GDP growth, at constant factor prices 8.7 4.3 9.0 -1.3 3.4 3.9 Agriculture 7.1 8.8 6.6 4.5 3.0 3.4 Industry 13.6 9.7 22.0 5.5 3.6 4.1 Services 4.9 -4.0 -5.2 -16.0 3.5 4.0 Inflation (Consumer Price Index) 8.0 8.6 9.0 12.6 10.0 8.5 Current Account Balance (% of GDP) -2.2 4.1 1.0 -7.7 -4.4 -2.6 Net Foreign Direct Investment (% of GDP) 2.3 0.4 0.2 0.9 1.8 2.5 Fiscal Balance (% of GDP) -2.7 -3.1 -1.5 -3.4 -2.8 -2.3 Debt (% of GDP) 43.1 49.9 42.9 45.3 44.8 43.9 Primary Balance (% of GDP) -1.7 -2.2 -0.5 -2.1 -1.4 -1.0 a,b International poverty rate ($1.9 in 2011 PPP) 3.4 3.3 3.0 3.2 3.1 3.1 a,b Lower middle-income poverty rate ($3.2 in 2011 PPP) 15.0 14.8 13.9 14.4 14.2 14.0 a,b Upper middle-income poverty rate ($5.5 in 2011 PPP) 45.1 44.5 42.7 43.7 43.4 42.9 GHG emissions growth (mtCO2e) 9.9 7.8 9.6 5.2 7.1 7.5 Energy related GHG emissions (% of total) 40.9 43.1 46.3 46.7 48.2 49.8 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. a/ Calculations based on ECAPOV harmonization, using 2007-TLSS, 2019-, and 2015-HSITAFIEN.Actual data: 2015. Nowcast: 2016-2021. Forecasts are from 2022 to 2024. b/ Projection using point-to-point elasticity (2007-2019) with pass-through = 1 based on GDP per capita in constant LCU. MPO 40 Apr 22