3. Caucasus and Central Asia: Need to Increase Resilience and Accelerate Reforms to Become Emerging Markets

Abstract

Growth in the CCA is expected to remain robust in the near term, though subject to downside risks. The recovery in oil and gas production and other extractive industries has been supporting economic activity. Remittances inflows have also held up well, despite a marked economic slowdown in Russia, the main destination for labor migrants from the region. Nonetheless, lower-than-anticipated growth in key emerging market economies and a tightening of external financing conditions present risks to the outlook. The CCA countries should take advantage of the current conditions to enhance their resilience to shocks by increasing fiscal and financial buffers where they are low, and accelerating economic reforms to increase long-term growth potential. Better governance and stronger policy frameworks are essential to set in motion an accelerated and comprehensive structural transformation by which the CCA countries can become dynamic emerging market economies.

Contributor Notes

Prepared by Sami Ben Naceur, with inputs from Jonathan Dunn, Mark Horton, and country teams; and research assistance by Jaime Espinosa-Bowen.
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