Executive Summary

This report analyses the Asian Development Bank’s (ADB) latest economic outlook concerning the Central Asian region, highlighting an expected deceleration in GDP growth of over 2025–2026.

Despite the projected robust growth in some states, like Kyrgyzstan, Tajikistan, and Uzbekistan, the entire region is under growing strain because of global economic difficulties and domestic fiscal reforms. Inflationary trajectories diverge across the region, reflecting differentiated structural challenges and policy responses.

The ADB’s projections underscore persistent geopolitical and economic risks that could compound regional vulnerabilities in the medium term.

Key Takeaways

• The ADB forecasts a slowdown in Central Asia’s aggregate GDP growth from 5.4% in 2025 to 5.0% in 2026, influenced by global and fiscal pressures.
• Inflation will ease in Kazakhstan and Uzbekistan, but will rise in Kyrgyzstan and Tajikistan because of increased demand, tariffs, and currency depreciation risks.
• Structural reforms, regional integration, and improved trade logistics are critical to mitigating downside risks and sustaining long-term economic resilience.

Background Information

According to projections published in the ADB’s Asian Development Outlook (ADO) 2025, the Central Asian region is entering a phase of economic moderation. Early April 2025 data projected regional GDP growth of 5.4% in 2025, slowing to 5.0% in 2026. These projections account for stricter fiscal policies and ongoing global uncertainty, such as volatile energy markets and trade disputes.

Analysts expect Kyrgyzstan and Tajikistan to record the highest growth rates among individual states, at 8.5% and 7.4% respectively in 2025, with slight declines in 2026. Forecasters expect Uzbekistan to maintain stable growth, while they project slower expansion for Kazakhstan and Turkmenistan because of fiscal consolidation and external demand constraints. Inflationary dynamics vary: while 2026 project Kazakhstan and Uzbekistan to see reduced inflation, Kyrgyzstan and Tajikistan will confront rising price levels.

The April 2, 2025, announcement of new US tariffs added uncertainty to regional trade forecasts. The ADB notes that, while regional economies remain generally resilient, further integration and logistics optimisation are critical to maintaining growth momentum.

Geopolitical Scenario

In the geopolitical context, Central Asia plays a significant role in Eurasia because of its strategic position. Currently, the region is part of a “new geopolitical game”, especially after the beginning of the Ukraine conflict and the affirmation of a multipolar world.

This “new geopolitical game” includes international powers (Russia, China, the United States, the European Union) and regional actors (Turkey, Iran, Pakistan, India, Gulf Arab monarchies). Therefore, we must analyse and contextualise economic performance considering the recent geopolitical dynamics.

Kazakhstan, as the region’s largest economy, faces the dual challenge of sustaining growth while implementing fiscal reforms aimed at reducing budgetary deficits. The government’s pragmatic, but politically risky, VAT increase and tax exemption cuts aim for fiscal sustainability. This may dampen domestic consumption and erode short-term growth prospects, particularly in 2026.

In Kyrgyzstan and Tajikistan, higher growth rates mask underlying fragilities. On the political level, the recent agreement on border demarcation allowed Bishkek and Dushanbe to overcome a prolonged controversy which has represented a regional destabilising factor.

At the economic level, both countries are experiencing inflationary pressures largely driven by expanding domestic demand, rising utility tariffs, and expected currency depreciation. Remittance inflows and trade with larger regional economies closely tie their growth trajectories, leaving them vulnerable to exogenous shocks. Structural constraints, such as limited industrial diversification and dependency on external financing, continue to weigh on long-term stability.

Uzbekistan appears better positioned, underpinned by industrial expansion, infrastructure development, defence modernisation and expansion, and a relatively diversified export base, including textiles, hydrocarbons, and minerals. Uzbekistan’s regional integration efforts and strong demand in key sectors could shield it from wider regional instability. Tashkent’s vulnerability to energy price fluctuations and supply chain disruptions remains significant.

Turkmenistan, while maintaining a moderate growth outlook, is likely to experience subdued external demand. Because of its isolated economy and dependence on oil, changes in global energy markets or political situations (such as China’s energy imports or sanctions) could greatly affect its export income.

Trade routes in Central Asia, especially those involved in China’s Belt and Road Initiative (BRI), could become more expensive and difficult to manage. Being landlocked, the region faces amplified challenges from external logistical issues.

Persistent regional differences in inflation and fiscal capacity ultimately reveal a lack of coordinated macroeconomic management in Central Asia. The absence of harmonised regulatory frameworks or shared monetary instruments limits the region’s ability to respond collectively to systemic shocks.

Conclusion: Risk Assessment for Investors

From an investor’s perspective, the ADB’s latest economic projections for Central Asia show a region undergoing structural transition rather than outright economic weakening. Although the ADB projects a slight slowing of aggregate growth, strong underlying demand persists in consumer markets, energy, and industrial development.

For private investors, this presents both cautionary signals and new sectoral opportunities. Uzbekistan and Kazakhstan maintain relatively stable investment environments, actively pursuing reforms to enhance transparency, fiscal responsibility, and private sector involvement. These conditions favour substantial long-term investment, primarily within infrastructure, energy, logistics, and the digital economy.

However, we must rigorously assess short- to medium-term risk factors. Government austerity, including tax increases and cuts to subsidies, could dampen consumer confidence and shrink the money supply. Investors need to watch inflation, especially in Kyrgyzstan and Tajikistan, as monetary policy might not keep up. Fluctuations in the value of money could also negatively affect returns on assets prices in the local currency.

US-China economic tensions, the Russia-West conflict over Ukraine, and growing regional involvement from outside powers create a strategically complex geopolitical landscape. Therefore, investment strategies must incorporate geopolitical risk mitigation, for example, through diversified portfolios spanning multiple markets and sectors.

We advise a selective and calibrated approach in the future. Regional integration offers promising investment opportunities, especially in renewable energy, transport infrastructure, agribusiness, and extractives, where multilateral financing or public-private partnerships can reduce entry barriers.

Simultaneously, investors should prioritise jurisdictions demonstrating dedication to economic reform, better governance, and a stronger rule of law. The industrial diversification in Uzbekistan and Kazakhstan’s move toward fiscal independence from their sovereign wealth funds show more robust institutional development.

Central Asian economies’ futures will be determined by how well they handle economic difficulties and remain open to global trade and investment, factors that will characterise the region’s investment climate in the coming five years.

SpecialEurasia OSINT Team

*Cover image: Economic trends and chart (Credits: AI Generative Freepik)

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