These four countries benefited from the recovery of the global economy through buoyant metal prices and the rebound of exports. Kazakhstan additionally benefited by stronger oil prices while the other three gained from a marked recovery in workers’ remittance inflows, the publication said.

The Update maintains the GDP forecasts for Turkmenistan and Uzbekistan, while revising downward projections for Azerbaijan and the Kyrgyz Republic. Growth in Azerbaijan’s oil production has slowed.

The Kyrgyz economy suffered from political unrest. On balance, these developments contributed to a higher GDP growth forecast in 2010 for the subregion to 5.1% from 4.7%. In 2011, the GDP growth forecast for Central Asia is 5.7%, little changed from 5.9% expansion estimated in ADO 2010, the ADB underlines.

Economic indicators in the first half of 2010 signal that all economies that suffered from low growth in 2009 (except the Kyrgyz Republic) are experiencing higher growth following the recovery of the global economy.

Exports have pick up in all countries. Particularly, buoyant gas and oil prices greatly benefit hydrocarbon exporters (Azerbaijan, Kazakhstan, Turkmenistan, and Uzbekistan).

In Armenia, Georgia, and Tajikistan, prices for their major exporting commodities, especially metals, increased, which helped to narrow their current account deficits. In the Kyrgyz Republic, the positive economic outlook of early 2010 was soured by widespread political instability and civil unrest in April and June. Largely as a result, that economy is now projected to contract by 3.5% in 2010. All these four countries (which are non-hydrocarbon exporters) are undertaking economic adjustment programs supported by International Monetary Fund (IMF) credit facilities.

The Russian Federation has been on a recovery path since the second half of 2009. Reflecting its extensive economic relations with Central Asia, trade, investment, and workers’ remittances from that country to the subregion picked up. According to data from the central bank of the Russian Federation, aggregate remittances to the eight countries increased on an annual basis by about 16% during the first half of 2010. The increase in remittances was a main factor stimulating domestic consumer demand in recipient countries.

Until the global recession started, remittances were a leading factor boosting growth for the Armenian, Kyrgyz, and Tajik economies for years. These economies were severely affected by the decline in remittances during the global recession. In Tajikistan, anecdotal evidence indicates that about half of the labor force is working abroad, and one-third of them in the Russian Federation. Armenia saw a sudden drop in remittance inflows, which halted many construction projects. In the Kyrgyz Republic, recovery of remittances boosted private demand and moderated the current account deficit in the first half of 2010. In Azerbaijan, the rapid expansion of oil production has been the main source of high growth. Since oil production is approaching a plateau, expansion in the non-oil sector will now largely dictate the pace of overall GDP growth.

Due to the slow recovery of domestic demand, inflation in most countries will generally remain subdued in 2010–2011, and well below the double-digit levels experienced during earlier years of very rapid growth.

In Armenia, inflation increased between the last quarter of 2009 and the first quarter of 2010 due to higher international commodity prices, pass-through effects from depreciation in early 2009, and the recovery of remittance-driven consumer demand. These factors have prompted an upward revision in the inflation forecast.

In Uzbekistan, the rapid growth of bank credit as well as passthrough effects from continuing local currency nominal depreciation induced inflation pressures and higher inflation now forecast for 2011, the bank’s publication said.

Slower growth in Azerbaijan and the Kyrgyz Republic are mitigating price pressures and projected inflation. Subregionally, the Update slightly reduces the inflation projections of ADO 2010 from 6.7% to 6.6% in 2010 and from 6.6% to 6.5% in 2011.

While energy exporters are exhibiting strong current account surpluses, energy importers will see pressures on their current account deficits. Exports in the main hydrocarbon-exporting countries (Azerbaijan, Kazakhstan, Turkmenistan, and Uzbekistan) grew fast between the end-2009 and the first half of 2010 due to higher oil and gas prices and buoyant demand. Projections of current account surpluses have been raised for Azerbaijan and Kazakhstan. Export growth is picking up across the energy-importing countries in the subregion, though it is accompanied by higher import demand, thereby limiting improvements in current account deficits.

The narrowing of the current account deficits in Georgia and Tajikistan from ADO 2010 projections is mainly explained by the strong recovery of remittance inflows. On balance, the subregion’s current account surplus is projected to increase from 7.0% to 8.4% of GDP in 2010 and from 7.5% to 8.3% of GDP in 2011 in the Update, the ADB said.