News
02.10.2009
IMF Forecasts Deeper Contractions in Russia and CIS This Year
The International Monetary Fund lowered its economic outlook for Russia and other former Soviet states this year as stimulus measures fail and bank lending is slow to recover.
Russia will shrink 7.5 percent this year, compared with an earlier forecast for a 6.5 percent slump, the Washington-based lender said in its World Economic Outlook today. The IMF revised down its projection for the Commonwealth of Independent States and two neighboring countries to a 6.7 percent contraction.
The risks “for the region are tilted downward, with greater risks for economies that are in deeper recessions and face difficult financing conditions,” the report said.
The worst global slowdown since World War II has eroded demand for raw materials from CIS nations like Ukraine and Kazakhstan, while a drop in the flow of remittances from Russia has hurt economies in the Caucasus and Central Asia. Armenia, Tajikistan and Belarus were among countries to devalue national currencies and tap emergency funding from the IMF.
The fund raised its 2010 forecast for regional economies including Georgia and Mongolia, which are not members of the CIS, a grouping of post-Soviet nations, to growth of 2.1 percent
The combined economies in the area grew 8.6 percent in 2007 and 5.5 percent last year, according to IMF data. The lender earlier forecast a 5.8 contraction for the region this year, followed by growth of 2 percent in 2010.
Russia’s government expects the economy to contract 6.8 percent in the second half and 8.5 percent in 2009. Output shrank a record 10.9 percent in the second quarter.
Repercussions
A slower global recovery would delay a rebound in commodity-reliant Russia, “with negative repercussions for economies closely tied to its fortune,” according to the IMF. The fund reiterated its forecast for an expansion of 1.5 percent next year in Russia.
“Without this regional growth locomotive, the lower- income, non-oil-exporting CIS economies are expected to experience steep growth declines in 2009 followed in 2010 by a modest recovery -- growth of less than 3 percent,” the IMF said.
Ukraine, the first country in the region to line up for the IMF bailout, will probably contract 14 percent this year and expand 2 percent in 2010, the fund said.
Ukrainian output slumped 20.3 percent in the first three months and 17.8 percent last quarter. The economy may shrink as much as 12 percent this year, the deepest decline since 1996, according to the Economy Ministry.
Energy exporters in the CIS face a more “benign” outlook, the IMF said. Oil-rich Azerbaijan on the Caspian Sea will probably grow 7.5 percent this year and 7.4 percent in 2010, according to the report.
Kazakhstan, which holds 3.2 percent of the world’s oil reserves according to BP Plc, may slump 2 percent in 2009 as it recovers from turmoil in its financial system. The Central Asian country may enter a “modest recovery” supported by the government’s $10 billion stimulus program, leading to a 2 percent expansion next year, the IMF said.
