Russia and CIS

RGE's Q1 2010 Outlook

The Commonwealth of Independent States (CIS): The CIS (ex Russia) is expected to post a sluggish recovery of 3% in 2010, after lower commodity prices, reduced remittances and tighter global credit led to growth slowdowns throughout the region in 2009. These factors also narrowed the current account surpluses while tipping some into a deficit. The region’s heavy dependence on foreign financing exacerbated the economic situation as capital dried up while Russia’s sharp recession was transmitted throughout the region through lower remittances, investment and trade. Similarly, a sluggish and externally driven Russian recovery in 2010 will restrain regional growth.  IMF funds helped the most afflicted countries avoid significant budget cuts and balance of payments pressures. Azerbaijan and Uzbekistan, relatively closed economies, were the best performers in the CIS, maintaining large external surpluses in 2009 despite their slower pace of growth. By contrast, Kazakhstan and Ukraine, with exposed financial sectors, experienced negative growth (a very sharp double digit contraction in Ukraine’s case).

Russia: The Russian economy stabilized in H2 2009 at a low level as external demand improved. The improvement in H2 notwithstanding, the Russian economy shrank by almost 8% in 2009, much worse than in the Russian financial crisis. The increase in poverty, the shrinking middle class and tight credit suggest that domestic consumption, the growth driver in the boom years, will be slow to recover. A sluggish global economic recovery, outstanding debt and structural vulnerabilities, will keep Russian growth below trend (6%) even in 2011.

Read the Q1 2010 CIS Outlook.

Read the Q1 2010 Russia Outlook.