Published: 09 November 2015 г.
While growth on average is expected to reach 3.8 per cent in 2015 and edge upwards to 3.9 per cent in 2016, this is a slowdown from the healthy average 6 per cent real growth in 2014. The main two factors impeding growth are the recession in Russia and low commodity prices.
The EBRD’s report, “Regional Economic Prospects”, notes: “Within the region where the EBRD invests, the economies of Russia, Central Asia and Eastern Europe and the Caucasus have been most affected by the weaker external environment. Commodity exporters have been directly hit by a further drop in prices of oil, gas and metals (…) The rouble also weakened and the Russian economy remained in recession, adding to the pressure on currencies in Eastern Europe and the Caucasus and Central Asia, given these regions’ strong trade, investment and financial sector linkages with Russia.”
Within the Central Asian region, the following GDP growth per country is forecast for this year:
- Kazakhstan is expected to grow by 1.2 per cent (recovering slightly to 1.5 in 2016),
- Kyrgyz Republic by 5 per cent (slowing to 3.9 in 2016),
- Mongolia 3.3 (but expected to recover to 5 per cent in 2016),
- Tajikistan by 5 per cent (slightly lowering to 4.5 per cent in 2016),
- Turkmenistan is fastest-growing at 8.5 (same in 2016), and
- Uzbekistan’s growth is projected at 7.5 per cent (cooling slightly to 7.2 in 2016).
Remittances
Remittances from Russia to Central Asia and the EEC continued to decline at rates close to 40 per cent year-on-year in US dollar terms, as predicted in the previous issue of Regional Economic Prospects. Depreciating currencies of the recipient countries, however, meant that the value of remittances declined substantially less dramatically when expressed in local currency terms, or as a share of nominal GDP.
Growth in other regions
According to the EBRD’s latest REP, growth in the EBRD region as a whole, which now comprises 36 countries from Morocco to Mongolia, is expected to slow to just 0.2 per cent this year, from 1.8 per cent in 2014. Moderate growth of 1.6 per cent is expected in 2016.
Hans Peter Lankes, the EBRD’s Acting Chief Economist, said: “We may be looking now for something of an upturn in 2016 after five consecutive years of slowdown. But there are significant risks on the downside.”
The report flags a sharper than expected slowdown in China; a stronger increase than expected in US interest rates; political instability and geopolitical tensions; and an uneven implementation of the bailout programme in Greece as potential risks that may stall economic recovery and growth in the region.
The report also notes that the refugee crisis that intensified sharply in 2015 is affecting the economies of a number of countries. Turkey, for example, is estimated to be hosting more than two million refugees, while in Jordan refugees account for almost one-fifth of the population. This massive influx has strained public services, government finances and labour markets in these ‘frontline’ countries.
Transit countries in south-eastern Europe which have provided medical and social care, food, water and accommodation for refugees are also facing logistical and fiscal challenges.
The Ukrainian economy is now expected to contract by 11.5 per cent this year, a deterioration of four percentage points since the EBRD last published an economic forecast in May this year.
However, Ukraine is expected to show growth again in 2016. The economy may have bottomed out by mid-year and be on the way to gradual recovery. The IMF programme in Ukraine remains broadly on track.
In Russia, output is expected to contract by 4.2 per cent in 2015 and 1.2 per cent in 2016 as consumption and real incomes decline in the face of significantly lower oil prices, which compound structural problems and the effect of economic sanctions.
The recession is expected to ease in 2016 as the economy adjusts to lower oil prices and increased government spending provides additional stimulus.