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)|