Country Profile

Armenia’s economy expanded rapidly between 2017 and 2019, with the annual GDP growth rate averaging 6.8 percent. Prudent macroeconomic policies helped establish a track record of macroeconomic stability and an improved business environment following the political realignment of 2018.

However, in 2020 the twin shocks of the COVID-19 pandemic and the military confrontation with neighboring Azerbaijan derailed Armenia’s economic expansion and resulted in a sharp 7.4 percent contraction of the economy. These shocks were accompanied by an increase in poverty, especially among the urban populations and those not well covered by the Government’s pension and social assistance programs.

The Government’s fiscal response to the pandemic, which included spending packages and some tax breaks, combined with a decline in revenues due to the economic contraction, resulted in an increase of the public debt ratio to 67.4 percent of GDP in 2020.

Although a recovery is underway, long-standing structural issues prevent the country from reaching its full potential, including weak connectivity, the fiscal challenges of an aging population and significant outward emigration, pervasive informality, and skills mismatches. The persistence of geopolitical tension in the region continues to undermine investor confidence and exacerbate existing challenges.

Learn More: https://www.worldbank.org/en/country/armenia/

Supported by stable oil production and a modest acceleration in domestic demand, real GDP expanded by 1.4 percent in 2018. While oil production plateaued, the hydrocarbons sector overall posted growth of 1.1 percent, thanks to higher exports of natural gas. The non-energy economy expanded by 1.8 percent, reflecting greater dynamism in most economic sectors. Consumer price inflation decelerated sharply in 2018, falling to 1.6 percent from 7.9 percent in 2017.

Since the presidential election in April 2018, the Government of Azerbaijan has undergone significant changes. These include the nomination of a new prime minister and the appointment of several key ministers in charge of education, tax reforms, agriculture and rural development, the environment, and energy. The new Government has been tasked with continuing the reforms in key sectors to recover economic growth.

Since economic prospects will largely rely on rising gas exports, the projected acceleration in growth in the medium term will be temporary. The country needs reforms to boost private sector investment, reduce the state footprint, tackle issues of competitiveness, and develop human capital.

The notable increases in the 2019 budget allocations for education (up by 13 percent) and health care (by 44.5 percent) are important in terms of improving human capital. But further efforts are needed to align budget spending with development needs, including through strengthening medium-term budgeting and the public investment management system.

Learn More: https://www.worldbank.org/en/country/azerbaijan/ 

The large reliance on tourism makes Croatia highly vulnerable to adverse external shocks such as the current pandemic. GDP contraction in Croatia in 2020, at - 8.4 percent, was one of the largest in the European Union (EU) and in the Europe and Central Asia region. Going forward, EU funding through various sources aimed at restarting the economy and weathering the crises should play a key role in supporting the country’s economic recovery.

Croatia will need to use EU funds effectively for priority investments and accelerate reforms to address long-standing structural issues. Growth should be green, help in the country’s digital transformation, and support the development of a resilient economy. Although the vaccination program has started, the situation remains highly uncertain because of vaccine supply bottlenecks and the recent increase in infections due to the new virus variants.

At 65.2 percent of the EU27 GDP per capita in 2019 (purchasing power parity [PPP]), Croatia still lags behind its EU peers. Strengthening long-term growth is critical to accelerating the income convergence. This will require diversifying the economy toward more knowledge-based sectors and addressing the economy’s structural issues, including public sector governance, education outcomes, and the efficiency of the judiciary. On the fiscal front, the surge in public debt in 2020, reflecting the economic downturn and a large fiscal stimulus package, calls for fiscal prudence and greater efforts to increase the effectiveness and efficiency of public spending over the coming years.

Last Updated: Apr 07, 2021

Learn More: https://www.worldbank.org/en/country/croatia 

Kazakhstan has a land area equal to that of Western Europe but one of the lowest population densities globally. Strategically, it links the large and fast-growing markets of China and South Asia with those of Russia and Western Europe by road, rail, and a port on the Caspian Sea. 

Since independence in 1991, Kazakhstan has experienced remarkable economic performance. Rapid growth, fueled by structural reforms, abundant hydrocarbon resources, strong domestic demand, and foreign direct investment (FDI), has helped reduce poverty and transform the country into an upper-middle-income economy. 

But given that half of the country’s population lives in rural and economically isolated areas with poor access to public services and vulnerability to poverty, the COVID-19 pandemic is likely to exacerbate Kazakhstan’s economic and social vulnerabilities.

The Government responded early to the COVID-19 crisis and introduced a fiscal stimulus package of roughly 6 percent of GDP directed at small and medium-sized enterprises (SMEs) and individual households. To further support a strong, sustainable, and inclusive economic recovery, the authorities need to advance structural reforms while dealing effectively with the pandemic. The policy imperatives are multifold. The first is to diversify the economic base by improving the competitiveness of the non-extractive sectors, including through reforms in the financial sector. The second priority is to limit the outsized role of state-owned enterprises, enhance competition, and create a level-playing field for the private sector. The third priority is to improve the quality and progressivity of public spending to address inequality. Finally, it would be essential to strengthen public sector institutions and reinforce the rule of law to attract much-needed investment in the non-extractive sector.

Learn More: www.worldbank.org/kazakhstan

The Kyrgyz Republic is a land-locked, lower-middle-income country. It has rich endowments, including minerals, forests, arable land, and pastures, and has significant potential for the expansion of its agriculture sector, hydroelectricity production, and tourism industry.

The country has experienced instability since its independence in 1991. Corruption and nepotism were major stress factors underlying revolts that deposed presidents in 2005, 2010, and 2020. Mr. Sadyr Japarov, who came to power following political unrest in October 2020, was elected president in January 2021 with 80 percent of the vote and pledged to tackle crime and corruption while establishing order in the country. The presidential form of government was reinstated after 10 years of a parliamentary system, and a new constitution, adopted through a referendum in April 2021, further solidified the president’s authority. Parliamentary elections will take place in November 2021.

The Kyrgyz economy is vulnerable to external shocks owing to its heavy dependence on remittances (25 percent of GDP) and gold production (about 10 percent of GDP and 40 percent of exports). Strong and sustainable economic growth requires institutional strengthening and policies to develop the private sector, spur international trade, and encourage fiscally sustainable energy production.

Learn More: https://www.worldbank.org/en/country/kyrgyzrepublic

Despite a solid economic performance over the past two decades, Moldova still remains among the poorest countries in Europe. Although a growth model reliant on remittance-induced consumption has generated high growth and reduced poverty, it had become less sustainable well before the COVID-19 pandemic. The decline in remittances, combined with a shrinking and aging population, has resulted in low productivity growth, and a significant number of the lower-income population has become dependent on pensions and social assistance.

The pandemic and a severe drought in 2020 more starkly exposed the vulnerabilities of this growth model to shocks. With a subsequent decline in GDP of 7 percent in 2020, Moldova was among the countries in Europe most affected by COVID, which significantly impacted households and businesses across the country.

Learn More: https://www.worldbank.org/en/country/moldova

Because of its size, the already high costs of developing and running national institutions are compounded by a limited capacity to exploit economies of scale in the provision of public goods and services. An EU-compatible legal framework and regulatory bodies, as well as the ability to absorb EU funds, all require substantial capacity building.Montenegro is a small, open economy aspiring to join the EU by 2025. It is also an economy vulnerable to external shocks, as it relies heavily on capital inflows from abroad to stimulate its growth.

At the same time, the transition to a market economy requires a reduction in the state’s footprint in the economy. Creating a favorable environment for private sector development requires restructuring state-owned enterprises (SOEs) and rationalization of public spending to reduce the cost of the state.

Learn More: https://www.worldbank.org/en/country/montenegro

The World Bank classified Romania as a high-income country for the first time, based on 2019 data (per capita income of $12,610). However, the pandemic-triggered crisis pulled the country back into the upper-middle-income group. In the medium to long term, Romania needs to address its structural constraints, including persistent twin deficits and high inequalities, as well as weak growth fundamentals stemming from low productivity and problems with both the quantity and quality of labor, due mainly to shortcomings in the quality and inclusiveness of education and shortages in critical skills.

Romania’s economy contracted by 3.9 percent in 2020, one of the lowest contractions in the European Union (EU), and recovered strongly at 6.5 percent in the first half of 2021. The fiscal deficit surged to 9.2 percent of GDP at the end of 2020 and will remain high in 2021. Given Romania’s limited fiscal space, maximal absorption of the EU Multiannual Financial Framework and Next Generation EU funds will be crucial to a sustainable recovery.

Last Updated: Oct 13, 2021

Learn More: www/worldbank.org/romania

The Serbian economy started to show signs of recovery in the first half of 2021. The rate of economic growth averaged 1.9 percent annually in the decade prior to the pandemic and had just started to increase, averaging 4.4 percent in 2018–19. Consumption was the main driver of growth while investment remained low, hovering around 19 percent of GDP during 2010–19. 

In 2020, the Serbian Government focused on supporting the economy’s recovery from the impact of the COVID-19 crisis. It approved a robust fiscal stimulus program—amounting to nearly 13 percent of GDP—at the outset of the pandemic. Thanks to the timely deployment of the program, the economy experienced only a mild recession (of -1 percent) in 2020. The impact of the program, however, came at considerable fiscal cost, as the fiscal deficit reached 8.1 percent of GDP last year. 

Over the medium term, the Serbian economy is expected to return to pre-pandemic growth levels. However, the country still faces challenges that limit its potential growth, both in the short and medium to long terms. These include deteriorating governance, a lack of infrastructure, and an unreformed education sector. Most importantly, Serbia needs to do more to remove bottlenecks to private sector investment. 

Last Updated: Oct 11, 2021

Learn More: www.worldbank.org/serbia

Over the past decade, Tajikistan has made steady progress reducing poverty and growing its economy. Between 2000 and 2019, the poverty rate fell from 83% of the population to 26.3%, while the economy grew at an average rate of 7% per year. However, the rate of job creation has not kept pace with the growing population, leaving the economy vulnerable to external shocks, while the role of the private sector in the economy remained limited. Non-monetary poverty indicators in rural areas remained high, with only 36% of the population in rural regions having access to safe drinking water.

The social and economic wellbeing of the population severely deteriorated following the outbreak of COVID-19. The economy has been experiencing a fast recovery in 2021, however, the labor market remained weak and food insecurity more prevalent compared to pre-pandemic levels.

Tajikistan’s high vulnerability to climate change and natural disasters represents an additional challenge to successful economic management. Between 1992 and 2016, natural and climate-related disasters caused GDP losses of around US$ 1.8 billion, affecting almost 7 million people.

The National Development Strategy (NDS) to 2030 sets a target of increasing domestic incomes by up to 3.5 times by 2030 and reducing poverty by half. This target is achievable if Tajikistan transforms its current growth model and gives the private sector more opportunities to invest, create jobs and contribute to innovation and growth.

Learn More: https://www.worldbank.org/en/country/tajikistan

Uzbekistan has achieved substantial progress in transforming its economy and society since 2017. The Government is now moving on to the next stage of economic reforms to address structural constraints, such as the absence of factor markets and the state’s economic dominance in the economy. 

Despite the COVID-19 pandemic, thanks in part to reforms to liberalize prices and remove barriers to domestic and international trade, the country’s economy was one of the few in the Europe and Central Asia (ECA) region to avoid negative growth in 2020.

The Government has announced its intention to halve poverty by 2026 and achieve upper-middle-income status by 2030. These ambitious goals will require even greater efforts to accelerate Uzbekistan’s economic transition to a sustainable and inclusive market economy.   

Over the medium term, in addition to growth and faster poverty reduction, the Government will also need to invest in stronger safety nets, better labor market conditions, and improved health and education services for citizens.

In 2021, the country’s GDP is expected to accelerate to 6.2 percent as the authorities strengthen pandemic management. Success will depend on improved global economic conditions and progress on structural reforms to increase private sector growth, reduce state dominance in the economy, and increase economic inclusion.

Learn More: www.worldbank.org/uzbekistan