The timely shift to a flexible rouble exchange rate in Russia will help to alleviate economic recession in the CIS compared to 2009
However, because of a floating exchange rate of the rouble, other CIS countries need to take macroeconomic measures to prevent increases in external imbalances.
Almaty, 31 March 2015. At year-end, the aggregate GDP of the CIS countries is expected to go down by 2.4% and in 2016 it will resume growth at approximately 1.8%. This is suggested in the new issue of The CIS Macromonitor published by the Research Department of Eurasian Development Bank (EDB).
The Bank backs this forecast with assumptions that in 2015 oil prices will moderately restore and sanctions against Russia caused by the Ukrainian crisis will not be strengthened. In particular, its researchers believe that the average price of Brent in 2015 will be US $60 per barrel and will rise more in 2016.
The study emphasises that the stabilising effect of the flexible exchange rate policy, which has been timely adopted in Russia, on its economy will probably ensure a significantly milder economic recession in the region compared to 2009.
However, in order to prevent increases in external imbalances in other CIS countries, consistent and coordinated measures need to be taken in their monetary and budget policies. Failing this, the risk that they will lose their external stability will remain significant in the near future.
Most countries in the region take measures to adjust their foreign exchange, monetary and budget policies. These measures are aimed at stabilising their balances of payments against decreases in export revenues, migrants’ transfers, investment and domestic producers’ competitiveness caused by the depreciation of the rouble. Some countries revise their currency rates by means of one-off or gradual devaluation. At the same time, the countries consolidate their public finance. Some of them have reconsidered their budgets for 2015 to ensure more savings.
The report suggests that the effects of the key events of 2014, which influenced the CIS economies, will most probably persist throughout 2015. These include the significant appreciation of the US dollar against other currencies, while the largest central banks pursue different monetary policies, and the decreases in the prices of raw materials, primarily oil.
“In the meantime, the signs of the recovering balanced economic growth in the world, which is caused, in the first place, by accelerated growth in the eurozone and its slowdown in the US, suggest that the dynamics of main currencies with respect to each other will be quieter in the second and third quarters of this year,” EDB experts believe. “At the same time, one can expect that the prices of raw materials, including oil, will partially restore.” These factors will help to ensure greater stability of the Russian rouble and simplify adaptation of the macroeconomic policies of other CIS countries to external conditions.
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. 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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