BISHKEK (TCA) — With 2017 nearing to its end, mid-term recovery prospects of the Eurasian Development Bank (EDB) member countries — Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia, and Tajikistan — become clearer to an extent. While at the beginning of the year there were concerns over the continuing recession in some countries of the region, it becomes evident by its end that all the EDB countries demonstrate positive economic growth, according to the findings of the monthly Macroeconomic Review published by the Chief Economist’s Group at EDB.
The report points out that improvements in certain indicators in different countries this year gave way to regional trends covering almost all the EDB member states: in addition to positive growth, there is also distinct tendency towards de-dollarization in the EDB economies, as well as recovery in real wages and consumption.
Other regional trends include lower inflation, the recovery in international reserves, the lowering of central banks’ key rates, relative stabilization of exchange rates, and improved ratings and outlooks by main rating agencies.
The EDB experts believe that the key factor of its member countries’ mid-term macroeconomic stability is the fiscal situation and public debt dynamics. The moderately tight fiscal policy has stabilized public debt. Researchers also believe that corporate debt and capital inflows to the EDB countries in the near future can increase with further improvements in the nations’ sovereign ratings and Russia’s attainment of an investment-grade rating (from at least two of the three major international rating agencies), which may happen, if the external environment develops favorably, in 2018. On the other hand, global risks remain significant. These are the most important on the part of the U.S. and include possible increases in the FRS rates and uncertainties associated with Trump’s administration’s economic policy.
“While the EDB countries’ exposure to external shocks lessens to an extent, domestic economic risks should weigh more in the next several years,” Yaroslav Lissovolik, Chief Economist at EDB, notes. These include, in particular, instability in the banking sectors of the region’s countries, including high levels of overdue bank loans in Belarus (12.8% in September 2017), Kazakhstan (12.8%) and Tajikistan (24.1%, less interbank debts). The key economic policy risk may be associated with the excessive stimulation of economic growth to the detriment of macroeconomic stability, against the background of relatively easy and quick decrease in inflation to its record-lows this year.
The authors of the review believe that, despite these risks, if measures to stimulate growth are balanced with the critical mass of achievements in the area of macroeconomic stability, this year may become pivotal for the EDB countries’ efforts to reach a sustainable growth trajectory.
Eurasian Development Bank (EDB) is an international financial institution founded by Russia and Kazakhstan in January 2006 with the mission to facilitate the development of market economies, sustainable economic growth, and the expansion of mutual trade and other economic ties in its member states. EDB’s charter capital totals US $7 billion. The member states of the Bank are Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia, and Tajikistan.
