EDB researchers: The growth of the CIS economies in 2012 and the first six months of 2013 was below their potential
Almaty, 17 July 2013. In Q1 2013 the CIS economies faced a 0.2% reduction in industrial production caused by a slowdown or decrease in exports and investments in almost all CIS countries. This retarded the annual growth of the CIS’ aggregate GDP, which stood at 1.7%. This conclusion is suggested in the new issue of The CIS Macromonitor published by Eurasian Development Bank’s (EDB) Research Department.
However, EDB experts expect the CIS economies to grow by 3.3% in 2013 and 4% in 2014. «We believe that the growth of the CIS economies in 2012 and the first six months of 2013 was below their potential,» the authors emphasise. «If there are no significant external or internal shocks, in the second half of this year the CIS economies will return to the trajectory of their post-crisis
Azerbaijan’s GDP grew by 3.1% in Q1. At that, the share of the oil and gas sector in GDP decreased by 4% year-on-year, while overall production in other sectors grew by 11.4%. The construction sector had the highest growth of 50%.
In Q1 2013 the growth of Armenia’s GDP reached 7.5%. The country’s strong economic dynamics was driven by the high growth in the industrial sector (increased agricultural processing, extraction of metal ores and production of basic metals) and a relatively strong domestic demand stimulated, in part, by migrants’ transfers (+8.7%). At the same time, the experts state that, despite the growth attained in export-orientated sectors, Armenia’s foreign economic indicators have worsened. Its external vulnerability has manifested itself in the reduction of international reserves and the devaluation of the national currency. EDB forecasts that the growth of Armenia’s GDP will slow down to 5% at the end of 2013. Inflation will reach at least 5.5%.
The growth of the Belarusian GDP in Q1 reached 3.5% year-on-year, due to the restoration of consumer and investment demand. However, EDB analysts believe it will slow down in Q2, because the majority of economic sectors demonstrate negative growth indicators. The research states that the objectives of the Belarusian economy have not changed: the country still needs to strengthen its balance of payments and retard the growing prices. If the decrease in the refinancing rate do not outpace the slowdown of inflation and the government persists with its moderate budget policy, the growth of the consumer price index can go down to 15% at the end of 2013. At the same time, the situation with the country’s external balance, which continued to worsen, remains tense: the current account in Q1 showed a deficit of 17.1% of GDP. One of the causes of this situation were payments on foreign investments: the stability of the balance of payments depends on investors’ willingness to reinvest their profits in the country.
Kazakhstan’s situation is characterised by the worsening of macroeconomic indicators. Weaker demand has caused a slowdown in the GDP growth to 4.6%. The balance of payments went down to 0.6% of GDP. In addition, EDB experts believe that the improvement in the budget surplus in Q1 2013 was caused by the retarded performance of the budget expenditures. In Q1 2013 inflation reached 6.8% p.a. (compared to 5.1% year-on-year). However, EDB researchers expect that the current oil prices, the possible increase in metal prices, the relative strengthening of the external demand, the restored growth in the construction sector, the expected acceleration in agriculture and the potential commencement of oil production in the Kashagan field can speed up the growth of GDP to 5.2% by the end of 2013.
The growth of Kyrgyzstan’s GDP in Q1 was 7.6% p.a. due to recovery in the metallurgical sector and significant dynamics in the trade and services sectors. At the same time, the industrial growth (without taking into account the Kumtor gold producing company) slowed down because of a reduction in textile and food production. The trade deficit remains high because of worsened trade conditions and the slow restoration of gold exports. EDB expects Kyrgyzstan’s GDP to grow by 7.4% in 2013 and 4.5% in 2014.
After a fall of 0.8% in 2012, Moldova’s economy grew by 3.5% in Q1 2013 triggered by private consumption and the growing foreign demand. The improvements in industrial production, freight transportation and the agrarian sector suggest that the Moldavian economy has favourable short-term and
Russia’s economic performance in Q1 2013 was rather weak. Its GDP grew by 1.6%, while the industry had no growth and exports decreased. The low level of revenues from non-oil and gas sectors (compared to the budgeted figures) has caused tensions in budget performance. The data for April and May suggest that extractive industries will resume their growth, but processing sectors will remain stagnant. The report states that in Q2 additional growth can be expected in extractive industries and agriculture.
Tajikistan’s economy grew significantly in Q1 2013 (by 7.3%) due to the dynamics of the retailing and services sector. At the same time, the processing industry continued to slow down in the first five months of 2013 and its growth reached a mere 0.4%. Metallurgy remains stagnant (-1.7%) and the textile and clothing sector has negative growth indicators (-12.2%). Lower world prices of the country’s main exports (aluminium and cotton) influenced its foreign trade indicators. Over the first five months, exports decreased by 4.2% and imports grew by 8.8%.
The growth of Turkmenistan’s GDP in Q1 2013 decreased to 9.2% (compared to 11.1% in 2012) because of weaker external demand, lower oil prices and lower investments in fixed assets. The economic dynamics is ensured by the state’s investment policy to diversify the economy through the modernisation of production, the formation of new industries and the construction of infrastructure. High export revenues have exceeded the planned figures by 60% and formed a budget surplus of 6.4%.
The growth of Uzbekistan’s GDP in Q1 2013 fell to 7.5% (compared to 8.2% in 2012) because of the global economic recession, the reduction in prices of raw materials and the seasonal nature of the Uzbek economy. The main growth driver is the strong domestic consumer and investment demand, which is financed by the state from the budget and the Reconstruction and Development Fund in the framework of the socioeconomic programme for economic modernisation. The report suggests that the country’s GDP in 2013 will continue to grow at a high rate of 7.5% due to the proactive governmental funding of economic development initiatives.
Ukraine’s GDP in Q1 2013 decreased by 1.1%. EDB analysts point out that this is the third quarter in a row when the country has negative growth indicators. Over the first five months of the year the economic situation in the country remained complicated. In particular, its industrial production indicators worsened compared to the second half of 2012 and were not restored in April-May. «In the best case we can expect stabilisation in the industrial sector in Q2. The negative dynamics in the construction sector seems to continue. The only sectors that demonstrated growth were trade, agriculture and finance,» says the report.
The e-version of the publication is available online.
Additional Information
Eurasian Development Bank 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 exceeds US $1.5 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.
Read more about EDB at https://www.eabr.org