EDB upgrades economic growth outlook for member states
Improvements included an increase in the world's oil prices as well as greater global economic growth. This is the finding presented in The Macroeconomic Review published by the Chief Economist Group at the EDB.
The paper states that, as a result of improvements in regional economic growth and mutual trade, the outlook for the EDB member countries' growth rates in 2017 has been revised. For Russia, the significant increase in GDP growth rates since Q2 2017 and the improved foreign and domestic macroeconomic situation resulted in an upgrade of its outlook for GDP growth in 2017 from 1.4% to 1.7%. If the foreign environment continues to be the same or improves further for the Russian economy, the balance of risks is expected to shift towards greater growth rates. Improvements in Russia's dynamics also add impetus to other EDB member countries: the outlooks for GDP growth in 2017 were upgraded for Belarus (from 1.4% to 1.8%), the Kyrgyz Republic (from 3.7% to 4%), Tajikistan (from 6.2% to 7.2%), and Kazakhstan (from 3.4% to 3.7%).
The active economic recovery over this year has also entailed revisions of economic growth prospects for 2018-2019. "We believe that improved medium-term outlooks for the region's countries will depend, to a significant extent, on their capability to use the potential of their internal economic growth drivers," Yaroslav Lissovolik, Chief Economist at the EDB, points out. These drivers include easing monetary policies with lower central banks' rates, the improvement of the efficiency of public infrastructure expenditure, and structural measures to enhance labour productivity.
According to EDB researchers, the main long-term challenge for the global economy will be the continuing imbalances that provoked crises over the recent ten years. The most important of them is income inequality both within the countries and between developed and developing nations. It is aggravated by weak economic integration when regions that need integration are least involved in the globalisation of world trade.
The special report attached to the review pays special attention to the de-dollarisation of the EDB economies as another factor that can boost economic environment in the region. The degree of dollarisation has been declining over the current year in all the EDB countries. This was largely due to the stabilisation of exchange rates, lower inflation, improved economic activity, and recovered trust in national currencies. Belarus, Kazakhstan and the Kyrgyz Republic have demonstrated the most significant decline in dollarisation (measured as the share of foreign currency deposits in broad money) among the EDB countries. The report suggests that these positive developments will enhance the effectiveness of the countries' monetary policies, as well as conditions for the achievement of lower inflation rates and greater financial stability.