Central Asia's economic expansion predicted to escalate, but inflation concerns loom large
The Asian Development Bank (ADB) has recently updated its growth forecast for economies in the Caucasus and Central Asia, with the region now projected to grow by 5.5% in 2025 and 5.1% in 2026. This revision is a result of stronger domestic demand driven by increased government spending on capital investments and social services, particularly in Kazakhstan, and improved performance in extractive industries, particularly due to the early key oil production expansion.
According to the ADB's latest Asian Development Outlook (ADO) report, the primary factor contributing to the revised upward growth forecast for Kazakhstan is the earlier launch of the Tengiz oil field expansion project, which is expected to boost mining output. This development, coupled with OPEC+ decisions to raise oil production, has strengthened Kazakhstan's growth trajectory.
The robust performance of various sectors in Kazakhstan, including mining, transport, construction, and manufacturing, has also contributed to the overall growth. Increased tax revenues in Kazakhstan have enabled increased government investment in infrastructure and social sectors, further supporting economic expansion.
Despite the positive revisions in the Caucasus and Central Asia subregion, the broader Developing Asia and Pacific forecasts were lowered due to external risks such as higher US tariffs, trade uncertainty, geopolitical tensions, and potential deterioration in China’s property market. These factors pose downside risks for the region’s outlook.
Elsewhere in the region, Uzbekistan saw inflation peak at 10.3% in March, while Georgia reported annual inflation of 3.5% in May. Inflation in the Kyrgyz Republic reached 8.0% in May, due to the country's reliance on imports of food and energy. Tajikistan recorded minimal consumer inflation at 0.1% in May, and Azerbaijan's inflation stood at 5.9% from January to May.
However, the growth projections for other countries in the region remained unchanged, according to the ADB's latest Asian Development Outlook report. Notably, the report does not provide information on the growth prospects of countries outside the Caucasus and Central Asia.
The ADB's report does not mention any other factors contributing to the growth projections for the Caucasus and Central Asia, although it does note an interest rate hike in Uzbekistan amid rising investment, energy tariffs, and slow disinflation.
The report is available on adb.org for those interested in further details. The improved outlook for the Caucasus and Central Asia is a positive sign for the region's economic future, and the ADB's revised forecasts reflect this promising development.
[1] Asian Development Bank. (2025). Asian Development Outlook 2025. Retrieved from adb.org [2] Asian Development Bank. (2025). Kazakhstan Country Operations Business Plan 2023–2025. Retrieved from adb.org [3] Asian Development Bank. (2025). Kazakhstan: Macroeconomic Update. Retrieved from adb.org [4] Asian Development Bank. (2025). Kazakhstan: Public Expenditure Review. Retrieved from adb.org
- The Asian Development Bank's updated forecast for Kazakhstan's growth in 2025 and 2026 is largely attributed to the earlier launch of the Tengiz oil field expansion project, which boosts mining output, and OPEC+ decisions to raise oil production, both falling under the category of finance and business.
- The increased tax revenues in Kazakhstan as a result of a robust performance in sectors like mining, transport, construction, and manufacturing, have enabled the government to invest more in infrastructure and social sectors, thus supporting economic expansion, once again illustrating the interconnectedness of these sectors in the realm of finance and business.
