UPDATE 3-Central Asia oil economies bucking global slowdown-IMF

Mon Nov 12, 2012 6:07am EST

* IMF sees 5.5 pct GDP growth for C.Asia energy exporters

* Urges Kazakhstan, others to build "fiscal buffers"

* Better regulation needed to avert repeat of bad loans (Adds details, quotes)

By Robin Paxton and Mariya Gordeyeva

ALMATY, Nov 12 (Reuters) - Oil- and gas-exporting countries in Central Asia should take advantage of growth of around 5.5 percent this year and next to invest in developing other industries, the IMF said on Monday.

The region is currently shielded from a global slowdown by high commodity prices and moderate exposure to Europe, a senior official said.

The IMF backed investment in health, education and infrastructure but advised Kazakhstan and other countries in the former Soviet region to spend wisely to avoid overheating and to develop a tax base that is less reliant on energy.

"There's a temptation to spend a lot. While this is welcome, it's important to keep in mind not all of the oil wealth can be spent while it's being earned," said Juha Kahkonen, deputy director of the IMF's Middle East and Central Asia department.

In its latest Caucasus and Central Asia report, the International Monetary Fund forecast economic growth for the region's four energy exporters - Azerbaijan, Kazakhstan, Turkmenistan and Uzbekistan - would slow to about 5.5 percent this year from 7 percent in 2011.

Kazakhstan's economy, the largest in Central Asia, expanded by 5.2 percent year-on-year in January-September compared with 7 percent growth a year earlier, official data show. The government forecasts 5.4 percent gross domestic product (GDP) growth for the full year.

Kazakhstan is the largest ex-Soviet oil producer after Russia, as well as the world's No. 1 uranium miner and a major exporter of grain and industrial metals.

The country has accumulated $56.9 billion in its National Fund for collecting windfall oil revenues. It has forecast the fund will grow to more than $100 billion by 2015.

"It's important that the quality of spending is high," Kahkonen said while presenting the IMF's regional outlook. "(Energy exporters) would also benefit from a more diversified tax base; a tax base that's not so dependent on oil and gas."

Kahkonen said such countries should work aim for a sustainable, non-oil fiscal deficit of between 6.0 percent and 6.5 percent of GDP, compared with about 10 percent currently.

NON-PERFORMING LOANS

Kazakhstan's economic recovery from the global financial crisis in 2007-08 has been hampered by non-performing loans (NPLs), a legacy of the banking sector's over-exposure to bloated real estate markets and external borrowing.

With NPLs accounting for more than 30 percent of the total portfolio, Kahkonen said he believed the problem had peaked, but urged "vigilance in banking supervision and proper business models" to prevent any repeat.

The IMF also said countries in Central Asia and the Caucasus should do more to regulate the "informal economy" - business neither taxed nor monitored by the government - which accounts for more than 25 percent of GDP in six of the eight countries.

"It matters because workers have little or no social protection," he said. "The budgets in all of these countries are missing revenues from the 'informal' sector ... It's a symptom of underlying structural problems."

In Kyrgyzstan and Tajikistan, two of the poorest ex-Soviet countries, a significant portion of GDP comprises remittances sent home from hundreds of thousands of migrant labourers.

The IMF said that "robust" remittance inflows from workers in Russia should ensure average GDP growth of around 5 percent this year in those countries which are net importers of oil and gas: Armenia, Georgia, Kyrgyzstan and Tajikistan.

Economic growth in these countries is projected to average around 5.8 percent next year, the IMF said. (Additional reporting and writing by Dmitry Solovyov; Editing by Ruth Pitchford)

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