YEREVAN, October 10. / ARKA /. Growth in the Commonwealth of Independent States (CIS) will be lower in 2012 than previously forecast due to the impact of crisis-ridden Europe and a dip in commodity prices, the International Monetary Fund said on Tuesday.
Global uncertainty and the debt crisis in the eurozone, the CIS’s most important outside trading partner, would slow growth to 4 percent in 2012, below a July forecast of 4.1 percent and down from nearly 5 percent in 2011, the Fund said in its semi-annual World Economic Outlook report.
Financial conditions in the region’s three largest economies – Russia, Kazakhstan and Ukraine — have been hit hardest by the crisis in Europe and general risk aversion, the Fund said, with capital flowing out and stock prices falling. The IMF forecast growth in the Ukraine, an energy importer, would slow to 3 percent this year from more than 5 percent in 2011, as the economy stumbles due to weaker European demand for its exports.
But growth in the CIS, a group of former Soviet republics, was still solid in the first half of the year, and the IMF urged commodity exporters like Russia to fill government coffers while it still can, in case the situation in Europe or worldwide worsens.
Highly reliant on exports of oil, gas, and other commodities, the CIS is vulnerable to any fall in commodity prices that would accompany a global slowdown.
“The major CIS economies should take advantage of the current, still-robust economic conditions to rebuild fiscal policy buffers,” the IMF report said.
It is particularly important to maintain growth in Russia, where any shock would reverberate throughout the region via Russia’s deep trade, investment and remittance ties to its neighbours. Russia’s non-oil deficit has more than tripled since the global recession.
But government spending, as well as growth in credit, have also helped Russia weather recent turmoil, the IMF said, and the economy is projected to expand 3.7 percent this year and 3.8 percent in 2013. Growth was 4.3 percent in 2011.
With lingering global risks, the IMF said CIS countries should implement structural reforms and strengthen banks to improve their ability to withstand future financial shocks. -0-
