The EDB Macroeconomic Review: The region’s economies are growing steadily, with a 2.8% year-on-year increase in their aggregate GDP in January–August, compared to 2% in the first half of 2023

18 October 2023

Almaty, 18 October 2023. The Eurasian Development Bank (EDB) has released the latest Macroeconomic Review for its six member states. This regular publication provides a roundup of the macroeconomic situation and projects near-term developments in the member countries. The review also contains detailed statistics on key macroeconomic indicators.

The EDB region’s economies continue to grow strongly, with the combined GDP of the Bank’s member states increasing by 2.8% year-on-year in January–August 2023. This growth rate marks a 0.8 percentage point acceleration compared to the first half of the year.

The dynamics of the region’s aggregate GDP were largely influenced by stronger economic growth in Russia and Belarus. Russia’s GDP, as estimated by the Ministry of Economic Development, increased by 2.5% year-on-year in January–August, following a 1.6% year-on-year growth in the first half of the year. Belarus’s GDP growth accelerated to 3.1% year-on-year in January–August, compared to 2% in the first six months. The high economic activity in Russia and Belarus was supported by stimulative economic policies and the renewal of value chains. Russia and Belarus demonstrated continuous GDP growth since the beginning of the year and it is expected to remain high in Q4 2023.

The economies of Central Asia and Armenia continued to grow steadily in January–August 2023. During this period, economic activity in Armenia, Kazakhstan and the Kyrgyz Republic increased by 10.4%, 4.9% and 3.3% year-on-year, respectively, driven by continued robust domestic demand. EDB analysts anticipate that the economies of Central Asian countries and Armenia will maintain high growth rates by the end of this year.

The aggregate growth rate of consumer prices in the EDB member countries was 6.3% year-on-year in September, up from 5.8% in August. The Macroeconomic Review highlights that higher inflation resulted from the realisation of pro-inflationary risks in Russia. EDB experts note the risk of accelerated inflation in certain countries of the region before the year-end.

In Russia, price growth continued to accelerate to 6.0% year-on-year in September, following 4.3% in July. Price pressures intensified due to the rapid expansion of domestic demand, the pass-through effect of the Russian rouble weakening on prices and higher inflation expectations. EDB analysts project further inflation acceleration in Russia in the remaining months of the year, influenced by the above factors. Against the backdrop of increasing price pressure, the Bank’s experts believe that a further increase in the Bank of Russia’s key rate is likely.

In Belarus, inflation hit a historic low of 2.0% year-on-year in September, down from 2.3% in August, largely due to price controls. Inflation in Belarus is expected to accelerate by the end of the year due to rising production costs amid growing domestic demand and higher inflation in Russia. The Bank’s analysts also forecast a higher consumer price growth in Tajikistan in the second half of the year, owing to strong domestic demand, increased world energy prices and price growth in Russia.

In Kazakhstan and the Kyrgyz Republic, EDB analysts expect a further decline in annual inflation rates as the high rates from the previous year are excluded from the calculations, and inflationary pressures from global markets ease. If inflation decreases, the Bank’s experts admit that the National Bank of Kazakhstan could further reduce its base interest rate, and that the Kyrgyz Republic could initiate a series of rate cuts.

In Armenia, annual price growth returned to positive values, at 0.1% year-on-year, after experiencing deflation during the summer months. Inflation remains below the Central Bank of Armenia’s target interval (4±1.5%) due to the strengthening of the Armenian dram and tight monetary conditions in the first six months of the year. However, the risk of more rapid price growth acceleration has increased due to a surge in consumer demand and domestic currency weakening in late September and early October

EDB analysts emphasise that the Bank’s economies still face significant external risks. The review notes that conditions have emerged for slower global economic growth, which may lead to an extended period of higher interest rates. This could hinder the region’s economic development. However, internal factors such as demand and institutional changes could still support economic growth in the EDB member countries and help mitigate the negative impact of the external environment.

The Macroeconomic Review is available on the Bank’s website.

Additional Information:

The Eurasian Development Bank (EDB) is an international financial institution investing in Eurasia. For more than 17 years, the Bank has worked to strengthen and expand economic ties and foster comprehensive development in its member countries. The EDB's charter capital totals US $7 billion. Its portfolio consists principally of projects with an integration effect in transport infrastructure, digital systems, green energy, agriculture, manufacturing, and mechanical engineering. The Bank’s operations are guided by the UN Sustainable Development Goals and ESG principles.

The EDB Media Centre:

pressa@eabr.org

www.eabr.org

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