Economic growth rates in the EDB countries continue to rise in Q2 2017 (monthly macroeconomic review)
Moscow, 8 June 2017. Leading indicators of Eurasian Development Bank’s (EDB) countries, as confirmed by data of the Eurasian Economic Commission (EEC), PMI indexes, and sector data, suggest that economic growth rates in Q2 2017 continued to rise.
These are the findings presented in the monthly macroeconomic review prepared by EDB’s Chief Economist Group.
The report states, in particular, that this year the growth in freight turnover in all the Eurasian Economic Union’s (EAEU) countries was the highest over several recent years. In Russia, for example, it was the highest over six recent years. According to Russia’s Ministry of Economic Development, GDP growth accelerated to 1.4% in April, while Kazakhstan’s GDP growth in January-April 2017 is estimated at 3.7%. Forecasts by international organisations also improved: the Organisation for Economic Cooperation and Development, for example, upgraded its outlook for Russia’s real GDP growth from 0.8% to 1.4% in 2017.
The Bank’s experts note that the global environment was controversial for the EDB countries. One of the negative factors that triggered volatility in global financial markets was Moody’s downgrade of China’s credit rating from Aa3 to A1 (with stable outlook). The agency pointed out to the risk of the further increase in the government’s debt burden and economic slowdown. The risk that the Federal Reserve System (FRS) will toughen its monetary policy is also relevant: market players expect the FRS to raise its interest rate at the June meeting.
The authors of the report also point out to positive factors, including the agreement reached by oil exporting countries (OPEC+) to extend oil output cuts until the end of March 2018, which is expected to help maintain energy prices in 2017. At the same time, growing geopolitical risks in the Near East in June increase uncertainty as to the stability of this agreement and the further dynamics of energy prices.
Yaroslav Lissovolik, Chief Economist at EDB, states that, “Among the risks for the EDB countries, we still expect that devaluation may affect inflation, although our expectations as to the significant impairment of the exchange rates in Russia and some other EDB countries decreased over recent months and, as a result, the official forecasts for these exchange rates were improved. An additional risk is associated with weather anomalies of the recent month that may affect harvests in Russia this year and accelerate food inflation”.
The drivers for economic growth include, according to the Bank’s experts, the continued softening of monetary policies in the majority of EDB countries. In Russia, for example, the Central Bank announced its plans to cut its key rate by 0.25-0.5 percentage points at its next meeting scheduled for 16 June.
There is also potential for an increase in foreign direct investment after the last-year growth. According to Finprom and the Ministry of National Economy, in April 2017 Kazakhstan recorded a 25% year-on-year increase in the amount of foreign companies and joint ventures operating in the country.
The full version of the monthly macroeconomic review is available online.
Please use this link to access all monthly macroeconomic reviews.
Additional Information
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 the Republic of Armenia, the Republic of Belarus, the Republic of Kazakhstan, the Kyrgyz Republic, the Russian Federation, and the Republic of Tajikistan.
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