The EDB member states’ 2021 projection for aggregate GDP growth raised by 0.7 p.p. to 4%

08 July 2021

The Eurasian Development Bank (EDB) has published an updated macroeconomic forecast for the Bank's operating region for 2021 and the medium term. In March, EDB analysts projected a strong recovery in the Bank’s member states, but the reality of the first half of the year exceeded expectations. As a result, the region’s largest economies Russia and Kazakhstan already reached the pre-pandemic levels by the end of Q2 2021, according to EDB estimates. The rapid recovery of the global economy, fuelled by credit and budgetary injections in developed countries, is accelerating inflation globally. Inflation in the EDB member states is moving in line with the global trend, with the regional average rising to 6.6% YoY in May 2021 from 5.6% in December 2020. Many inflationary factors will be neutralised with time. EDB analysts forecast that inflation in the Bank’s member states will slow to an average of 5.6% by the end of 2021 and return to target levels during 2022. 

Moscow, 7 July 2021. The Eurasian Development Bank has updated its macroeconomic forecast for 2021 and the medium term. The EDB operating region was not immune to the positive global trends in the first half of this year, as business activity recovered rapidly. Russia and Kazakhstan, according to EDB estimates, already reached the pre-pandemic GDP levels in 2Q 2021. That was possible largely due to government support measures and the marked easing of fiscal and monetary policy last year. The exports of the Bank’s member states in the first half of the year were substantially supported by stronger global economic activity and soaring prices for key export commodities. The easing of restrictive measures as a result of an improved epidemiological situation attributed greatly to the increase in business activity in the region.

The global incidence of the coronavirus is gradually declining and restrictive measures are being relaxed. In Russia and Kyrgyzstan, however, there was an increase in the reported cases of COVID-19 in June. The immunisation campaign, which has begun in the Bank’s member states, may help reduce the rate of infection further during the year. However, vaccination rates in the region are still moderate. As a result, the development of the epidemiological situation in the Bank’s member states is rather highly uncertain.

The review notes that the world’s largest economies this year will register their fastest growth in a decade but it will be associated with recovery. China’s GDP may increase by 8.5%, that of the Eurozone by 4.3%, and the U.S. economy by 6.5%. As early as 3Q 2021, the U.S. economy may be overheating due to massive budget and cash injections. However, the baseline scenario assumes that the Fed’s policy remains soft this year and that a cautious rate hike will start from late 2022–early 2023. Oil prices in 2021–2023 are projected to be within a comfortable range for the Bank’s operating region of US $60-65 per barrel.

The 2021 projection for aggregate GDP growth of EDB member states has been raised by 0.7 p.p. to 4% due to strong support from the global economy. The revision is attributable to an improved GDP growth estimate for Russia this year, from 3.3% to 4.1%. The pace of Russia’s economic recovery has exceeded expectations. Oil prices are higher than projected before and higher budget revenues are likely to result in additional support for business activity on the spending side.

Forecast of economic growth in EDB member countries


Source: EDB calculations.

The EDB’s GDP growth forecasts for Armenia and Belarus have also been raised to 4.2% and 1.3% in 2021, respectively. The stronger economic recovery of Russia, a key trading partner of Armenia and Belarus, has boosted the exports of these countries in the first half of the year. However, Belarus is projected to see a slowdown in economic growth in the second half of the year due to the introduction of restrictive measures by the U.S., EU, and UK.

The EDB maintains its projection for Kazakhstan’s economy to grow by 4% in 2021. High oil prices will continue to support economic activity in Kazakhstan. However, the more protracted effect of restrictive measures largely offsets the positive impact of the external environment.

The EDB’s growth forecasts for Kyrgyzstan and Tajikistan for 2021 are maintained at 3.9% and 6.1%, respectively. The faster-than-projected recovery of the Russian economy may not have a significant effect on the growth of the Kyrgyz and Tajik economies this year, as restrictions on cross-border labour migration are set to linger.

EDB analysts note that the inflation path in the Bank’s member countries is broadly in line with the previous projection. The price rises in the region are now largely imported. They are due to higher commodity prices and the weakening of national currencies during the previous year. With continued global constraints and rapidly increasing demand, delivery times are often longer and the choice of suppliers and components is shrinking. Demand-side pressures on prices are becoming increasingly persistent in most states in the region.

“The rapid recovery of the global economy, fuelled by credit and budgetary injections in developed countries, is driving asset prices up massively,” said Evgeny Vinokurov, EDB and EFSD Chief Economist. “Temporary factors, such as pandemic-induced disruptions in production chains, the shrinking choice of suppliers and components, and the reduced supply of certain crops, also contribute to this situation. As a result, we are seeing a global spike in inflation. Almost forgotten in the 2010s, rising inflation rates have not only returned to the agenda of central banks globally, but have also become a difficult challenge for monetary policy. I believe that the key to assessing the risks of high inflation is the relationship between the fundamental and temporal factors that led to its acceleration. So far, we believe that many of the inflationary factors are temporary and will be neutralised as the pandemic ‘wanes’ and the active phase of global economic recovery comes to an end. But we also see the possibility of persistent increases in the average inflation rate in the 2020s. It is realistic to assume that inflation in developed countries will be steadily higher than in the 2010s – not the 0-2% that the market was used to in the 2010s, but perhaps 2-4%. This is what the world’s norm was before the global financial crisis. Such persistent inflation rates do not constitute a structural problem for the global economy. But they will require an adjustment of the financial sector and the real sector.”

EDB analysts forecast the average inflation in the Bank’s member states to slow from 6.6% YoY in May to 5.6% by the end of 2021 due to an easing of demand-side inflationary pressures and the recovery of production chains. In Armenia, the EDB expects inflation of 5.4% at the end of the year; in Belarus, 8.7%; in Kazakhstan, 6.7%; in Kyrgyzstan, 7.7%; in Russia, 5%; and in Tajikistan, 7.4%.

In the face of heightened inflationary pressures, the EDB forecasts further cuts in monetary stimulus in most countries in the region. The Bank’s analysts expect Russia’s key rate to rise to 6–6.5% to keep the economy from overheating. With the projected slowdown in inflation, the Bank expects a transition to neutral monetary conditions in most EDB member states over the medium term.

EDB analysts also note that the return of global inflation poses significant risks to the economic development forecast for the Bank’s member states. Accelerating price rises and a strong global economic recovery raise the probability of rapid withdrawal of monetary stimulus. This is of particular importance to the U.S., whose economy could be overheated as early as 3Q 2021. With inflation persisting near 5% in the U.S. this summer, the Fed might tighten its rhetoric significantly as early as August–September 2021. This will increase capital outflows from emerging markets, amplifying their government bond yields, weakening national currencies, and raising domestic interest rates. The annual average exchange rate of the Russian rouble against the dollar in the risk scenario is projected to be 1.8% weaker in 2021 than the EDB’s baseline forecast and almost 5% weaker in 2022. Inflation in the Bank’s operating region could reach an average of 5.9% by the end of 2021, necessitating a tightening of monetary policy. This will lead to a loss of aggregate economic growth of the EDB member states, which could amount to about 0.1 p.p. in 2021–2022 compared to the baseline scenario.

Ruslan Dalenov, Vice Chairman of the EDB Management Board, summarised the key trends and forecasts: “Firstly, the EDB member economies are actively recovering in line with the global trend. Their adaptation to functioning in a pandemic can be considered a success. Secondly, at the end of 2021, the recovery the Bank’s member economies may be stronger than previously expected. Aggregate GDP growth is expected at 4%. The economies of the EDB member states will grow in the medium term even under the risk scenario. Third, inflationary pressures in the world and within the Bank’s operating region remain high. Inflationary factors are for the most part temporary, and the rate of consumer price raises in the EDB member states could decline by the end of 2021–2022.”

EDB's forecasts. Key macroeconomic indicators of the Bank’s member states (baseline scenario)




Inflation (as at year-end)

Exchange rate to U.S. dollar

(the year’s average)

Interbank rate

(the year’s average)































































Note: GDP and inflation in % YoY; the exchange rate in the units of national currency to U.S. dollar; the interbank rate in % (the refinancing rate for Tajikistan).

Source: EDB calculations

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

Other research publications by the EDB and EFSD are available in the Research section on the Bank’s website and the Publications section on the Fund’s website.

Additional Information:

The Eurasian Development Bank (EDB) is an international financial institution promoting integration and development in its member countries. For 15 years, the Bank has worked to strengthen and broaden economic ties and foster comprehensive development in its member countries – Armenia, Belarus, Kazakhstan, the Kyrgyz Republic, Russia, and Tajikistan. The EDB's charter capital totals US $7 billion. The EDB’s portfolio mainly consists of projects with an integration effect in the areas of transport infrastructure, digitalisation, green energy, agriculture, industry, and mechanical engineering. The Bank adheres to the UN Sustainable Development Goals and ESG principles in its operations.

The Eurasian Fund for Stabilization and Development (EFSD) amounting to US$8.513 billion was formed on 9 June 2009 by the governments of the same six countries. The EFSD assists its member states in overcoming the consequences of the global financial crisis, ensuring their economic and financial stability, and fostering integration in the region. The EFSD member countries signed the Fund Management Agreement with Eurasian Development Bank giving it the role of the EFSD Resources Manager.

The EDB Media Centre:

Azima Sapargaliyeva +7 (777) 750 00 08 (Almaty)

Sergey Gorbachev +7 (916) 727 22 00 (Moscow)

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