Central Asian Economies Are Booming As Region Builds On Energy, Infrastructure, And Sanctions-Driven Trade – OpEd

As the war in Ukraine continues to reshape global trade routes, Central Asia’s economies are showing impressive growth, according to a recent report by the European Bank for Reconstruction and Development (EBRD). The EBRD projects the region’s GDP will expand by 5.1 percent in 2024 and accelerate to 5.9 percent in 2025, fueled by rising revenues from commodities, increased infrastructure spending, and market-oriented reforms.

With remittance flows surging, wages on the rise, and a boom in tourism, especially in Kazakhstan, Kyrgyzstan, and Uzbekistan, Central Asia’s economies are seizing new opportunities while navigating increased scrutiny from the West. Governments across the region are ramping up investment in vital infrastructure sectors like transport, logistics, and energy to sustain growth. The EBRD also noted that “intermediated trade” with Russia – once a major growth driver – has hit a ceiling following last year’s rapid expansion.

In Kazakhstan, Central Asia’s largest economy, the EBRD forecasts 4.0 percent growth in 2024, rising to 5.5 percent in 2025 as the country pursues infrastructure projects and expands its Tengiz oil field. The country’s strategic position and energy exports make it a pivotal player in the region’s economic landscape, as it continues to balance its international trade commitments. As nuclear energy gains renewed attention globally, Kazakhstan’s substantial uranium reserves – over 10 percent of the world’s total – will enhance its significance as a key global supplier.

Kyrgyzstan, a fast-growing hub for regional tourism, is expected to see GDP growth of 9 percent in 2024, moderating to 7 percent in 2025. While this growth is supported by hospitality and transport, some analysts argue that Kyrgyzstan’s accelerated rise stems from its possible role in helping Russia evade sanctions. Since 2022, trade with the EU has increased more than tenfold, with some reports citing “false invoicing” practices allowing goods to be rerouted to Russia without physically entering Kyrgyzstan. In response, the U.S. Office of Foreign Assets Control (OFAC) sanctioned several Kyrgyz companies last year, also warning banks against facilitating trade with sanctioned Russian entities.

Under mounting international pressure, Kyrgyz authorities imposed a one-year ban in September on banking transactions for import-export deals where goods do not physically enter the country. They also established the “Trading Company of the Kyrgyz Republic,” a state-owned entity exempt from this ban and tasked with managing such trade – a move some critics have already labeled as “nationalizing” financial flows associated with sanctions evasion. The new trading company is expected to collaborate with state-owned Eldik Bank and Aiyl Bank, along with the recently registered private Asman Bank, which has ties to Russia, to facilitate transactions in alternative currencies, including cryptocurrencies, potentially circumventing Western financial restrictions.

In Tajikistan, the EBRD projects 8 percent growth in 2024, driven by higher wages, a focus on infrastructure, and precious metals exports, though the country faces volatility in remittances from Russia. Tajikistan has several massive investment projects in hydropower and mining underway. 

Meanwhile, Turkmenistan is expected to maintain steady 6.3 percent growth through 2025, backed by public investments and streamlined customs procedures. While improved trade efficiency supports the country’s transportation sector, Turkmenistan remains highly dependent on gas exports to China, leaving it exposed to shifts in Chinese demand.

Uzbekistan is also seeing strong economic momentum, with 6.0 percent growth anticipated in both 2024 and 2025, bolstered by remittances, tourism, and industrial expansion. However, a persistent energy deficit threatens to cap growth in the coming years.

While Central Asia’s per capita GDP has tripled since 2000, the region still lags behind global standards of living. Nikolai Podguzov, chairman of the Eurasian Development Bank, emphasized that sustained economic progress will require more industrialization. “If we want fast and sustainable growth, industry is essential,” he said, highlighting the need for Central Asian economies to generate high-value jobs and raise incomes to improve overall living standards.