DUSHANBE, January 7, 2016, Asia-Plus – The January 2016 edition of World Bank’s
Global Economic Prospects
notes that the developing Europe and Central Asia region is estimated to have slowed to 2.1 percent in 2015 from 2.3 percent the year before, as the eastern part of the region was hit by sharply lower oil prices, conflict in Ukraine and regional ripple effects from a recession in the Russian Federation. The western part of the region is benefitting from lower fuel import costs and a moderate recovery in the Euro Area.
International sanctions against Russia in connection with the conflict in Ukraine and lower commodity prices hindered Russia’s economy, which contracted by 3.8 percent in 2015 after growing by 0.6 percent the previous year. Plunging oil export revenues deteriorated Russia’s trade balance and weakened the ruble.
Growth in the Europe and Central Asia region is projected to rise to 3 percent in 2016 as oil prices fall more slowly or stabilize, Russia’s economy improves, and Ukraine recovers. Gains depend on whether the region can manage challenges including geopolitical tensions, low oil prices, and tighter external financing conditions.
A modest pick-up of growth over the 2016-18 forecast period in the eastern part of the region, which includes Eastern Europe, South Caucasus, and Central Asia, may be helped by a stabilization of commodity prices following the sharp drop since 2014. A bottoming-out of Russia’s recession in 2016 would support growth in the rest of the eastern part of the region.
Russia is projected to contract by 0.7 percent in 2016, before posting positive growth in 2017. Sustained low oil prices and international sanctions will be drags on economic activity. Weak investor confidence and high interest rates are chilling investment, and a sharp drop in consumer purchasing power has hurt consumption.
Growth should pick up modestly in Kazakhstan, rising to 1.1 percent in 2016 from 0.9 percent in the year just ended. The country will benefit from the Kashagan off-shore oil field coming on stream, oil prices stabilizing, and Russia’s economy healing. Growth will remain well below levels registered in the first decade of the century as weak domestic demand appears likely to limit industrial and services growth.
