Tajikistan s economic growth moderatedto 6.7 percent in the first half of 2014 from 7.5 percent ayear earlier as activity slowed in almost all sectors.Weaker world economic growth and lower prices for cotton andaluminum adversely affected the major export-orientedindustries, pushing total industrial growth below 3 percentfrom nearly 7 percent a year earlier. Lower inflows ofremittances due to the slowdown in Russia have translatedinto lower domestic demand and slower growth in services andhousing construction. Though growth in agricultural outputalso moderated due to heavy rains and low temperatures, itwas still a healthy 6 percent. Inflation began to pick up asfood prices rose and tariffs for utilities were adjusted,reaching 4.7 percent for the first half of 2014 compared to1.6 percent a year earlier. However, fixed investment grewswiftly as the public investment program got underway. GDPgrowth is projected to ease to 6.5 percent in 2014 becauseof the spillover effect from the slowdown in Russia and inexport sales. A Russian slowdown affects Tajikistan largelythrough the remittances channel. A slackening in remittancesweighs heavily on household demand, notably demand forservices and housing construction. Inflation pressures areexpected to increase but stable global food prices shouldhelp to keep growth in inflation within a single digit.Despite slower economic growth the fiscal deficit isprojected to remain unchanged in 2014 because of higher thanexpected revenues from foreign trade, reforms in revenuecollection, and spending restraint. The current accountdeficit is projected to widen to 3.7 percent of GDP becauseof sluggish export growth and the remittance slowdown.Tajikistan could perhaps benefit from the Russian ban onimport of food from the West but fragile market links,limited economies of scale, poor access to credit, andbarriers to entry and expansion limit Tajik ability tobenefit from increased Russian demand.
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