BISHKEK (TCA) — Growth in the Europe and Central Asia region continued to pick up in the first half of 2017, with commodity exporters and commodity importers alike achieving recovery. The region has benefited from rising oil prices, benign global financing conditions, robust growth in the Euro area, and generally supportive policies in several large countries in the area, according to the World Bank report “Global Economic Prospects June 2017: A Fragile Recovery”.
Strengthening activity indicators suggest Russia continues to expand in the first half of 2017, and modest monetary easing is anticipated to support growth in the near term. Among other commodity exporters, Kazakhstan’s rebound accelerated, helped by fiscal stimulus, and Azerbaijan showed some signs of improvement, the report says.
Among commodity-importing economies, the recession in Belarus shows some signs of abating, helped by Russia’s recovery.
The report forecasts that growth in Europe and Central Asia is to accelerate broadly to 2.5 percent in 2017, and to 2.7 percent in 2018, supported by continued recovery among commodity exporters and unwinding of geopolitical risks and domestic policy uncertainty in major economies in the region.
Russia is expected to grow at a 1.3 percent rate in 2017 after a two-year recession and by 1.4 percent in 2018, with growth helped by gains in consumption. Kazakhstan is projected to expand at a 2.4 percent rate this year and 2.6 percent in 2018 as strengthening oil prices and an accommodative macroeconomic policy stance support economic activity. Azerbaijan is anticipated to remain in recession, contracting by 1.4 percent as weaknesses in the banking system as well as tight monetary and fiscal policies continue to weigh on growth, before growing at a modest 0.6 percent rate in 2018.
Kyrgyzstan is expected to grow at a 3.4 percent rate in 2017 and 4 percent in 2018, Tajikistan at 5.5 and 5.9 percent, Turkmenistan at 6.3 and 6.5 percent, and Uzbekistan at 7.6 and 7.7 percent, respectively.
Belarus is anticipated to shrink by 0.4 percent this year, held back by continued fiscal tightening, but could resume growing at a modest 0.5 percent pace next year.
The report says that strengthening relations between Central Asian countries, including a provisional agreement on the demarcation between Kyrgyzstan and Uzbekistan, and restoration of direct flights between Tajikistan and Uzbekistan, point to an upside risk.
A renewed decline in commodity prices is another threat to the growth of commodity exporters in the region, and a disorderly tightening of global financial conditions could pressure currencies, raising borrowing costs and leading to capital outflows, the report said.
