Opening Asia for Russia

The Eurasian Development Bank predicted the recovery of the economies of its member countries

22.04.2020 117 просмотров

The Eurasian Development Bank predicts the beginning of a recovery in the economic activity of Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia and Tajikistan in the second half of this year, with a continuation in the next two.

This is stated in the EDB Macro Review, prepared by the bank's analysts.

The EDB believes that the region's economies will be supported by large-scale measures taken by the authorities in the field of fiscal and monetary policy. Their implementation will help mitigate the negative economic and social consequences of the COVID-19 pandemic and create conditions for the normalization of economic activity as the epidemiological situation improves.

The operating conditions of the EDB member countries changed significantly in late March-early April 2020. The tightening of lockdowns in major economies due to the COVID-19 pandemic has led to a downward reassessment of global growth prospects. Unprecedented measures to contain the spread of the disease, taken by the authorities of most of the bank's member countries, along with falling external demand and commodity prices, are having a significant impact on economic activity in the region. In this regard, the EDB has updated its macroeconomic forecasts, taking into account the effect of the indicated factors.

EDB analysts identify two main groups of channels for the impact of the COVID-19 pandemic on the economies of the bank's member countries. The first group of channels is associated with the complication of the external economic situation, which is manifested in a weakening demand for exports from the states of the region, a reduction in income from the supply of raw materials abroad due to falling prices, disruption of global value chains, a decrease in remittances, a deterioration in business sentiment, as well as tightening financial conditions. According to EDB experts, GDP losses in the bank's member countries from external factors could amount to about 2% in 2020.

The second group of channels is associated with internal restrictive measures introduced in a number of countries in the region to curb the spread of the disease. Their effect is manifested in a decrease in the production indicators of a large number of sectors of the economy, primarily those related to the service sector. The loss of annual GDP of the EDB member countries from a month of self-isolation is estimated by the bank's analysts at about 1.5–2%.

The review notes that under the influence of these factors, the aggregate GDP of the EDB member countries will decrease in 2020 by 2 .2% after an increase of 1.7% a year earlier. In Russia, Kazakhstan, Belarus and Armenia, output is expected to fall (by 2.3%, 1.0%, 3.3% and 1.7% respectively), while in the Kyrgyz Republic and Tajikistan a significant slowdown in its growth rates (to 5.5% respectively).

The weakening of national currencies in the first quarter of this year will put pressure on the cost of imported goods, which will serve as a key factor in accelerating inflation in most countries of the region in 2020. The impact of exchange rate dynamics on the prices of goods and services, according to the bank's analysts, will be limited, including due to the reduction in the effect of exchange rate pass-through on inflation in most EDB member states in recent years. In addition, the projected weakening of domestic demand and lower price growth in the countries that are major trading partners will have a significant disinflationary impact. The greatest impact of these factors is expected in 2021, which will lead to a significant slowdown in inflation in most EDB member states and may lead to monetary policy easing. remains high. The macroeconomic outlook for the states of the region critically depends on the course of the COVID-19 pandemic. There is still a possibility of deepening negative trends in the global economy, which may trigger a further fall in prices for key export commodities of the bank's member countries. The epidemic situation in the states of the region is difficult to predict, which does not allow us to speak with full confidence about the imminent lifting of quarantine measures. If these risks materialize, EDB's forecasts for GDP growth may be revised.

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