Deepening integration for economic diversification in North and Central Asia

Ongoing economic stagnation in North and Central Asia since the collapse of global oil prices in mid-2014 reinforces the need to diversify the subregion’s economic growth engine beyond the resource based sectors. Economic growth performance in the subregional economies is often volatile, largely influenced by global prices for a few commodities. For example, oil and gas account for more than 90 per cent of the total export value in Azerbaijan and Turkmenistan and more than half in Kazakhstan and the Russian Federation. Similarly, more than half of Kyrgyzstan’s exports comprise gold, while copper ore and aluminium account for one third of the exports from Armenia and Tajikistan respectively. A more diversified economic base in resource-based economies also would help reduce economic volatility in countries that rely on workers’ remittances, such as Kyrgyzstan and Tajikistan where workers’ remittances (mainly from workers in the Russian Federation) are equivalent to about a quarter of their GDP. Despite an expected modest rebound in the near term, global oil prices are projected to remain relatively low for an extended period of time. In this regard, an effort to broaden the economic base of North and Central Asian economies in order to increase their economic resilience to external adverse shocks remains an urgent task.