FIRST-HALF ROUNDUP FOR FERGHANA VALLEY ECONOMIES.

Azerbaijan and Kazakhstan enjoyed strong growth in the first half of 2001, largely thanks to their hydrocarbon endowments. Three other CIS countries–Kyrgyzstan, Tajikistan and Uzbekistan–managed to register solid growth in recent months despite a lack of significant petroleum reserves. As a group, all three posted substantial GDP rises in the first half of 2001, albeit with considerable variation across individual rates. Compared with the same period of 2000, Tajikistan had the highest rate of expansion and grew a full 10.3 percent in the first six months of 2001. Second place went to Kyrgyzstan, whose economy grew 6.7 percent, according to CIS data. Uzbekistan reported 4.2 percent growth.

As a yardstick for measuring welfare, however, growth rates remain imperfect. Because they are a function of earlier economic disruption as much as of currently favorable policies, higher growth rates do not translate directly into higher levels of income here and now. PlanEcon data indicate that, as of last year, the slowest grower, Uzbekistan, still had the group’s highest per capita GDP based on purchasing power parity (PPP). In 1995 dollars, Uzbekistan’s per-capita GDP at PPP last year was more than three times larger than Tajikistan’s, reflecting years of violence in Tajikistan. At the same time, Kyrgyzstan was only slightly less well off than Uzbekistan.

So whose future looks the brightest? A good indicator of general macroeconomic stability, inflation data are a useful complement to the growth data. On this dimension, Kyrgyzstan was the best performer, with a rate of just under 9 percent in the first half of 2001 compared to the same period of last year, while Tajikistan reported year-on-year consumer price inflation of over 50 percent. Uzbekistan has not released comparable data, but its published GDP deflator for the period, 48 percent, suggests that the early 2001 inflation level may have approached Tajikistan’s.

Each of the three countries is further hindered by the fact that just one or two commodities dominate exports. In the case of Kyrgyzstan, it is gold and electricity; for Tajikistan, it is cotton fiber and aluminum; and for Uzbekistan, it is again cotton fiber. Moreover, domestic savings rates have remained very low, far below the levels needed to support rapid growth. Consequently, each of the three has had to borrow externally to help finance fixed capital investments. In the cases of Kyrgyzstan and Tajikistan, this borrowing has reached alarming proportions, well in excess of 100 percent of GDP. All three economies continue to struggle to lay a basis for broad, long-term growth. But thus far, that goal has remained elusive (Interstate Statistical Committee of the CIS, Ministry of Macroeconomics and Statistics of the Republic of Uzbekistan, PlanEcon data).

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