The EDB Macroeconomic Review. August 2022

11 August 2022
The Eurasian Development Bank’s (EDB) analysts presented the latest issue of the Macroeconomic Review for the Bank’s six member states. The Macroeconomic Review is a regular publication by the EDB, which provides a snapshot of the macroeconomic situation in its member countries and assesses short-term developments. The review also contains detailed statistical information (monthly data) on key macroeconomic indicators

Full text (in Russian)

The review notes diverging economic dynamics in the region. While the economies of Russia and Belarus experienced declines (0.5% and 4.2% year-on-year, respectively) in the first half of 2022, the remaining member countries saw continued and steady GDP growth – 11.8% year-on-year in Armenia, 3.4% in Kazakhstan, 6.3% in the Kyrgyz Republic, and 7.4% in Tajikistan. Overall, the EDB region’s GDP in the first half of the year remained at the same level as in the previous year.

According to EDB analysts, economic growth in most member states in 2022 will be better than expected, facilitated in particular by the fairly quick adaptation to imposed restrictions as well as delayed sanctions on oil exports. The region’s economy has also benefited from action by public authorities – a stimulating fiscal policy, a sharp reduction in interest rates in Russia, and measures to streamline production and logistics chains.

However, the economic dynamics in the second half of the year could be significantly affected by deteriorations in the external environment. EDB analysts estimate the probability of a recession in the eurozone and the US as high, although such a recession is expected to be shallow. Nevertheless, it will have a short-term negative impact on the global demand for the region’s exports.

The strengthening of the Russian rouble in June and July proved to be quite significant. However, it is highly probable that its abnormal appreciation is already behind. In the previous Macroeconomic Review, EDB analysts estimated that the strengthening of the rouble could have negative consequences for the Russian economy. In the second half of the year, the rouble is projected to move towards more comfortable rates for the budget and exporters. The intensity of this movement will depend in the first place on the recovery of import demand.

An interesting observation is that the second quarter of 2022 saw a surge in individual remittances within the region. E.g., Armenia, renewed its absolute high for the second month in a row – in June and May it received $452 million and $266 million in individual remittances from Russia, respectively, while in 2021 the monthly average was $72 million. Remittances from Russia to the Kyrgyz Republic recovered their growth as early as April, at 14% year-on-year after a 33% year-on-year decline in March. This growth was due to the combination of two factors - the strengthening of the rouble against the dollar and the movement of more people between countries in the region. The second quarter also demonstrated the highest quarterly inflow of migrant workers to Russia over the last six years. This year’s significant growth in remittances is a significant factor supporting the region’s economies.

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