Central Asia's Economic Growth Forecast Increased by ADB, with a Caution on Inflation Escalation
The Asian Development Bank (ADB) has released its latest "Asian Development Outlook" report, which highlights increased inflation in several countries within the Caucasus and Central Asia region. Among the countries experiencing higher inflation are Armenia, Kazakhstan, and the Kyrgyz Republic.
One of the primary drivers of this inflation is the rise in utility and energy prices. Both Kazakhstan and Azerbaijan have seen significant increases in utility costs, contributing to the inflation increases. In Kazakhstan, inflation reached 10.1% in early 2025, up from 9.0% the previous year, despite tight monetary policy, largely due to rising utility prices [2][4].
The Kyrgyz Republic's inflation rate of 8% is largely attributed to its continued dependence on imported food and energy, making it vulnerable to external price shocks [2][4]. Azerbaijan’s inflation of 5.9% for January–May 2025 reflects the lagging effects from earlier increases in fuel and utility prices [2].
Furthermore, Armenia’s inflation rose to 3% during January–May 2025 compared to 0.8% the prior year, partly due to broader inflationary trends affecting the economy, which slowed growth primarily because of reduced industrial output [1][2][4].
Despite some countries maintaining relatively tight monetary policies (e.g., Kazakhstan), inflation has remained high, indicating persistent structural inflation pressures in the region [2][3].
Other factors contributing to inflation in the broader region include wage and pension increases in some countries (e.g., Turkmenistan) and energy tariff rises, but these are less central to Armenia, Kazakhstan, and Kyrgyzstan specifically [2].
In a positive development, the growth projections for other countries in the region remained unchanged in the ADB's latest report. The Tengiz oil field expansion in Kazakhstan is expected to boost mining output, and OPEC+ raising oil production for a third consecutive month on May 31, 2025, is further bolstering growth prospects for Kazakhstan.
The ADB has revised its growth forecast for economies in the Caucasus and Central Asia to 5.5% for 2025 and 5.1% for 2026. However, inflation in the subregion is expected to climb: 7.8% for 2025 and 6.7% for 2026.
Tajikistan recorded minimal consumer inflation at 0.1% in May, and Uzbekistan saw inflation peak at 10.3% in March before decreasing. Inflation in Azerbaijan stood at 5.9% from January to May, and Turkmenistan's inflation is forecast to reach 6.0% in 2025, fueled by expanded credit to state-owned enterprises and a 10% rise in public sector wages and pensions.
The full report can be found on the Asian Development Bank's official website (adb.org).
In the context of the ADB's latest report, Kazakhstan and Azerbaijan are dealing with increased inflation due to rising utility costs in their businesses, contributing to the overall financial strain in these countries. Meanwhile, the Kyrgyz Republic's inflation rate is primarily driven by its dependence on imported food and energy, creating vulnerabilities to external price shocks.
