ASTANA — Trade and investment between the Gulf Cooperation Council (GCC) and countries in the Caucasus and Central Asia (CCA) remain below their potential despite growing economic complementarities, according to a new International Monetary Fund (IMF) paper presented during a July 7 virtual launch event.
The paper, Strengthening GCC-CCA Economic Cooperation, examines trade and investment links between the two regions and outlines policy measures that could help unlock greater economic integration. Opening the discussion, IMF Deputy Director for the Middle East and Central Asia Department Subir Lall said strengthening regional partnerships has become increasingly important amid global uncertainty.
“Strengthening regional partnerships is not simply about expanding economic opportunities. It is also about building resilience. Strengthening trade and investment can help countries better withstand external shocks while supporting growth,” Lall said. Presenting the report’s findings, IMF co-lead author Francois Painchaud said both the GCC and CCA are among the world’s more open economies, with trade openness exceeding that of many emerging and advanced economies.
However, trade between the two regions remains relatively modest. “Despite the high trade openness in the GCC and the CCA, trade between the GCC and the CCA remains limited, although it has been increasing recently,” Painchaud said. According to the IMF analysis, exports in both regions remain concentrated in minerals and fuels, though diversification efforts are gradually changing the composition of trade.
“Both charts show a gradual reduction in the share of minerals and fuels in exports, reflecting the impact of ongoing diversification policies. This is important because this diversification creates more opportunities for trade between the GCC and the CCA,” Painchaud said.
The report also found that the GCC and Central Asia have complementary investment dynamics. While GCC economies have traditionally generated current account surpluses and supplied capital globally, Central Asian economies have largely been recipients of foreign direct investment (FDI).
Still, realized FDI flows remain below potential. “When we look at the average FDI-to-GDP ratio in the GCC and the CCA, we can see that it is well below the average of emerging markets, which suggests substantial areas for improvement,” Painchaud said. Trade agreements could deliver significant gains The IMF’s econometric analysis found that policy choices play a major role in determining trade outcomes.
According to the report, trade agreements are associated with an 80% increase in bilateral trade, with the strongest effects observed in agricultural products. Improvements in logistics, governance, and reductions in tariffs and non-tariff barriers were also linked to stronger trade performance.
For Central Asian countries, the IMF identified logistics and governance reforms as the highest-impact priorities. “The CCA countries should prioritize improving logistics and governance, and reducing trade restrictions and tariffs would also help boost trade,” Painchaud said.