Dependence On Energy Imports And Remittances Key Vulnerabilities

BMI View : The Tajik economy remains highly dependent on imports (especially energy), remittances inflows, and one export commodity - aluminium. As such, fluctuations in aluminium prices and the Russian economy (its key source of remittances inflows) remain key vulnerabilities to Tajikistan.

Tajikistan remains highly dependent on one commodity export - aluminium, comprising 55% of total exports, and volatility in aluminium prices constitutes a key risk to its macroeconomic landscape. While ongoing aluminium warehousing on the back of financing deals will likely prop up prices in the short term, longer-term prospects for prices look subdued due to increasing global oversupply, coupled with the weakening investment story in China, the main consumer of aluminium, and a normalisation of US monetary policy, among other factors. As such, our Commodities team has recently revised downward out forecast for the benchmark LME Aluminium three-month contracts to average US$1,850/tonne from US$1,900/tonne previously in 2014 and to US$1,950/tonne from US$2,000/tonne previously in 2015.

As prices are the primary driver of production volumes, the modest increase in prices that we project should translate in a more moderate contribution of aluminium exports to overall export growth in 2014-2015. Nevertheless, we forecast slightly more robust overall export growth than aluminium prices would warrant - of 7.3% in 2014, slightly above an estimated 7.0% for 2013, and 7.5% in 2015. The main reason for our sanguine growth projections is Tajikistan's prospects of joining the Russia-Belarus-Kazakhstan customs union by end-2014, with Armenia and Kyrgyzstan also in line to join over the next two years, as the elimination of tariffs is likely to bolster Tajikistan's agricultural and cotton exports.

Aluminium Prices Key For Export Growth
Tajikistan - Aluminium LME 3Month, US$/tonne (LHS) And Domestic Aluminium Production, tn (000)

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Related sectors of this article: Economy, Economic Activity
Geography: Tajikistan

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