ADB Increases Growth Forecast for Central Asia, Cautions on Rising Inflation

According to its latest Asian Development Outlook report, the Asian Development Bank (ADB) has raised its growth forecast for economies in the Caucasus and Central Asia to 5.5% for 2025 and 5.1% for 2026, up from previous projections of 5.4% and 5.0%, respectively.

The improved outlook reflects stronger-than-expected government spending on capital investments and social services in Kazakhstan. The earlier launch of the Tengiz oil field expansion is also expected to boost mining output, The Caspian Post reports citing The Astana Times.

“OPEC+ raised oil production for a third consecutive month on May 31, 2025, further bolstering growth prospects for Kazakhstan as it operates at maximum available capacity,” the report said. Growth projections for other countries in the region remained unchanged.

GDP growth rate and inflation data from Asian Development Bank. Photo credit: adb.org

However, inflation in the region is expected to climb. The ADB raised its subregional inflation forecast to 7.8% for 2025 and 6.7% for 2026, up from 6.9% and 5.9%, respectively, driven by inflationary pressures in Armenia, Kazakhstan, and the Kyrgyz Republic.

Armenia’s inflation rate increased from 3% in January to 5.8% in May, compared to 0.8% during the same period last year. In Kazakhstan, inflation rose to 10.1% from 9.0% amid higher utility prices, despite tight monetary policy. Inflation in the Kyrgyz Republic reached 8.0% in May, primarily due to the country’s reliance on imports of food and energy.

Tajikistan recorded minimal consumer inflation at 0.1% in May. Azerbaijan’s inflation stood at 5.9% from January to May, following earlier hikes in fuel and utility prices. Georgia reported annual inflation of 3.5% in May.

According to reports, Turkmenistan’s inflation is forecast to reach 6.0% in 2025, fueled by expanded credit to state-owned enterprises and a 10% rise in public sector wages and pensions. Uzbekistan saw inflation peak at 10.3% in March, prompting an interest rate hike amid rising investment, energy tariffs, and slow disinflation.