KHATLON REGION, TAJIKISTAN – AUGUST 16, 2017: Cleaning a solar cell in the village of Safedsang, … [+] Mu’minobod District. Nozim Kalandarov/TASS (Photo by Nozim KalandarovTASS via Getty Images)
TASS via Getty Images
Central Asia’s economies have been hit hard by the COVID-19 pandemic, with demand for the region’s prolific oil and gas supplies down substantially over the course of 2020. Relative to last year, global oil demand is expected to contract by 9 million barrels (about 10 percent) and crude prices remain at an anemic $48/bbl. International natural gas prices are at multiyear lows. This is bad news for gas giant Turkmenistan, hydrocarbon rich Uzbekistan, and OPEC+ member Kazakhstan, which all rely on oil and gas revenues to fill government coffers.
Due to COVID-19 the region’s GDP is projected to shrink by an average 1.7% in 2020, a massive reversal from pre-pandemic projections of 4-6% growth made in October 2019 by the World Bank. Global lockdown measures deployed in May 2020 led to a sharp decline in the region’s commodity-heavy exports, with subsequent contractions in services and manufacturing. In reality, the GDP slump may be even worse.
Foreign investment will play a key role in getting the region out of its economic slump. To learn more about the investment picture of Central Asia, please tune in to the International Tax and Investment Center (ITIC) panel on Thursday, December 10 at 9:00 am EST where experts will discuss findings from a newly published report authored by me and my colleague, James Grant. I’ll be joined by Kazakhstan’s Ambassador to the United States Erzhan Kazykhanov, one of the IMF’s foremost Central Asia experts Madina Zhunusbekova, and Deputy Minister of Foreign Affairs for Kazakhstan Almas Aidarov.
As we have seen over the course of 2020, Central Asian economies with the closest trade, commodity, and remittances relationships with the Eurozone, Russia, and China felt a disproportionate impact from the COVID downturn. OPEC+ production cuts to buoy crude oil prices in tandem with collapsing demand for transportation fuels compounded national revenue shortfalls in hydrocarbon exporters like Kazakhstan and, to a lesser extent, Turkmenistan and Uzbekistan.
Price and demand drops for feed stocks (natural gas and petroleum) and industrial power sources (natural gas and coal) further hurt national economies. In Kazakhstan and Uzbekistan, robust fiscal stimulus packages of 9% and 1.5% of GDP respectively helped curb economic slowdowns and better positioned those countries for recovery.
A vendor arranges fruits and vegetables at a market in Almaty on April 25, 2020, amid the … [+] coronavirus pandemic. (Photo by Ruslan PRYANIKOV / AFP) (Photo by RUSLAN PRYANIKOV/AFP via Getty Images)
AFP via Getty Images
COVID-19 also highlights the vulnerability of the extractive/remittance-dependent economic model, a system that brings with it the slew of social, political, and economic risks that remain barriers to outside investment. Concerns over governance, protectionist trade policies, and private sector competition are also front-and-center in the eyes of potential investors.
If there is a silver lining to the global pandemic, it is the clarity in barriers to economic development and the reinvigorated interest in accelerating Central Asia’s economic transition away from fossil fuels, raw materials, and remittances towards knowledge-based industries. While the strength of regional recovery is uncertain amidst the pandemic, the World Bank is anticipating 3.1% growth throughout 2021, providing for a moderate rise in commodity prices. A “downside scenario” of sustained low commodity prices and weaker than anticipated demand could mean growth closer to 1.5%.
Diverse natural resources, plentiful human capital, a burgeoning small and medium-size enterprise (SME) sector, are beginning to draw investors’ attention. In the wake of COVID-19, Central Asia’s more advanced economies are pursuing policies of economic diversification and advancement accompanied by structural reforms intended to invite further investment. With and emerging tech and financial centers springing up, some countries making annual progress in the World Bank’s “Ease of Doing Business” index.
The region is in the early stages of an energy transition, with renewable energy sources (RES) beginning to crop up. High solar irradiance and strong winds across the Kazakh Steppe, for example, make the country well suited for the deployment of green energy technologies. The potential for wind power in the landlocked country is estimated at 920 billion kWh/year, and solar power could provide 2.6 billion kWh/year, with another estimated 4 GW of geothermal power that could be drawn from water in artesian pools.
TAJIKISTAN – NOVEMBER 14, 2018: A view of the Rogun Hydropower Plant under construction on the … [+] Vakhsh River. The station is to be part of the Vakhsh Cascade. Nozim Kalandarov/TASS (Photo by Nozim KalandarovTASS via Getty Images)
Nozim Kalandarov/TASS
Neighboring Uzbekistan, which relies on hydropower plants for 10% of its energy mix, has plans for the expansion of its renewable energy sector: low carbon power generation facilities totaling over 8.4 GW are planned to be completed by 2030. Plus, construction of Uzbekistan’s first nuclear power plant with a capacity of 2.4 GW began last year. Once online, these projects will contribute to Uzbekistan’s goal of a 25% renewable energy portfolio within the decade.
How the nations of Central Asia manage the post-COVID recovery, and the extent to which they embrace economic diversification and market-oriented policy reform, will determine the future of their foreign investment profiles. ‘Green growth’ and post-industrial economic projects will play a pivotal role in this process.
NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
