Economic growth in Central Asia and the Caucasus will slow down in 2023, and the region’s prospects are heavily influenced by external factors. This is according to the latest International Monetary Fund (IMF) regional outlook.

In 2022, growth in the countries of the region was 4.8% and ranged from 12.6% in Armenia to 3.2% in Kazakhstan and 1.8% in Turkmenistan.

Next year, the IMF estimates that economic growth in the region will decline to 4.2% and then pick up slightly to 4.5% in 2024.

What affects the region’s economy

Recent developments in the region reflect two parallel trends: a recovery from the pandemic and the spillover effects of the war in Ukraine, the report says.

Unexpected secondary effects of the war in Ukraine:

  • The downturn in Russia in 2022 did not reduce economic growth in the region. On the contrary, most countries in the Caucasus and Central Asia experienced a significant boost to growth.
  • Inflows of private funds increased sharply. Net remittances from Russia to Armenia, Georgia and Azerbaijan increased more than five-fold year-on-year in 2022, reaching 17, 8 and 3% of GDP, respectively. Tajikistan and Uzbekistan also saw a doubling in the value of net remittances, increasing from 13% to 23% of GDP.
  • The influx of migrants caused by the war increased demand, but also increased pressure on prices in the rental and real estate markets. The number of migrants from Russia, arriving mainly in Armenia, Georgia, Kazakhstan and Uzbekistan, ranges between 50,000 and 150,000, representing up to 5% of the host country’s population.
  • Sanctions have destabilised traditional trade (rail) routes between China and the EU, shifting trade routes from Russia to neighbouring countries. These changes in flows lead to an increase in transit trade. In addition, higher prices for listed energy commodities have had a favourable impact on the foreign trade balance of oil-exporting countries. Also, a better-than-expected harvest in Russia alleviated food security concerns.

However, as these secondary effects subside, countries are expected to slow down in 2023, according to the IMF.

Among the main risk factors:

  • Deterioration in Russia’s growth performance relative to the forecast;
  • Reduced remittances;
  • Lower inflows of migrants from Russia;
  • Disruptions in product supply chains.

Overall, increased trade with Russia makes the CA and Caucasus countries more vulnerable to potential worsening during the war and to more stringent sanctions.


Since mid-2022, overall inflation has fallen in Armenia, Georgia and Tajikistan, but continued to rise in Kazakhstan and Kyrgyzstan and reached a stable level in Uzbekistan.

In Azerbaijan, inflation started to decline slowly in September 2022 but remained in double digits in early 2023.

One of the key determinants of inflation in the region is wages. In most countries, nominal wage growth is higher than inflation. This may increase the persistence of inflation and make monetary policy difficult.

What does the IMF forecast

  • Inflation will ease from 13% in 2022 to 11.8% and 8.5% in 2023 and 2024 respectively, but this decline will be uneven across countries.
  • In low-income countries, which includes Uzbekistan, inflation will remain at 11% in 2023 and then decline to 9.3% in 2024.
  • In the oil-exporting countries (Azerbaijan, Kazakhstan, Turkmenistan) inflation will decline slowly, to 13% in 2023 and 8.7% in 2024.
  • In emerging market economies (Armenia, Georgia) inflation is expected to decline sharply to 6.4% and 4% in 2023 and 2024. This will be possible due to falling world commodity prices, the delayed impact of monetary tightening and the continued strengthening of the national currency.