Trade between EDB countries recovers in q1 2017
25.05.2017,
15:57
In Q1 2017, stabilized raw material prices and, as result, stabilized national exchange rates in most of Eurasian Development Bank’s (EDB) countries have ensured recovery in mutual trade in the region.
YEREVAN, May 25. /ARKA/. In Q1 2017, stabilized raw material prices and, as result, stabilized national exchange rates in most of Eurasian Development Bank’s (EDB) countries have ensured recovery in mutual trade in the region. This finding is presented in the macroeconomic review prepared by the Chief Economist Group at EDB.
According to the national statistics agencies, all the EDB member countries improved mutual trade in Q1 2017 as compared year-on-year. The leaders were Kazakhstan (41%), Russia (33.7%), and Belarus (30.2%). The report suggests that, “Belarus’ trade with the EAEU countries may be given an additional impetus after the Russian-Belarusian agreement on energy carrier prices and supplies is entered into.”
The study also points out that migrant workers’ remittances were another area where linkages between the countries improved. In Q1 2017, remittances to the Kyrgyz Republic were higher than 54% year-on-year. In Armenia, the figure was 14%.
“The further softening of monetary policies remains a reserve factor that can accelerate economic growth in most of the EDB countries, in particular in view of the significant decline in inflation, which was record low in Russia,” Yaroslav Lissovolik, Chief Economist at EDB, comments.
“In addition to reduced interest rates, investment growth in the EDB countries may be supported by an inflow of foreign direct investments if to take into account the relatively low figures of previous years and the improved external environment. At the same time, the possibility to use budget stimuli remains limited because the EDB countries’ budgets are not sufficiently adapted to lower and volatile raw material prices.”
The authors of the review believe that economic growth in Russia may improve from 0.8% to 1.1% by the end of the year. The forecast was changed based on economic activity data and as a result of a revision of oil price estimates in view of global energy market trends that emerged in Q1. The forecast for Belarus’ GDP growth from minus 0.5% to plus 1.3% by the end of 2017 was improved because of faster than expected economic recovery in Q1 and the entering into an agreement on gas prices and oil supplies from Russia. Kazakhstan’s GDP forecast was raised from 2.3% to 2.8% due to stronger external demand and the fiscal deficit widened to rehabilitate the banking system. More optimistic foreign trade expectations and revised fiscal impulse were the main arguments for improving the Kyrgyz Republic’s GDP forecast for 2017, from 3.6% to 4.0%. Tajikistan’s economic growth outlook was revised from 6.7% to 6.2% because of the worsened situation in the banking sector.
“The key risk until the end of 2017 is that, after a period of appreciation of foreign exchange rates in some of the EDB countries, raw material markets can become volatile again,” the review says. “The events in early May in Russia and Kazakhstan’s financial markets show that, after having strengthened significantly in the previous months, the national exchange rates become more sensitive to the growing volatility of oil prices. Apart from oil price fluctuations and the fact that some currencies in developing markets are overly appreciated, an increase in FRS rates may exert additional pressure on currencies in emerging economies.”
Eurasian Development Bank (EDB) 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. EDB’s charter capital totals US $7 billion. 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. -0-
According to the national statistics agencies, all the EDB member countries improved mutual trade in Q1 2017 as compared year-on-year. The leaders were Kazakhstan (41%), Russia (33.7%), and Belarus (30.2%). The report suggests that, “Belarus’ trade with the EAEU countries may be given an additional impetus after the Russian-Belarusian agreement on energy carrier prices and supplies is entered into.”
The study also points out that migrant workers’ remittances were another area where linkages between the countries improved. In Q1 2017, remittances to the Kyrgyz Republic were higher than 54% year-on-year. In Armenia, the figure was 14%.
“The further softening of monetary policies remains a reserve factor that can accelerate economic growth in most of the EDB countries, in particular in view of the significant decline in inflation, which was record low in Russia,” Yaroslav Lissovolik, Chief Economist at EDB, comments.
“In addition to reduced interest rates, investment growth in the EDB countries may be supported by an inflow of foreign direct investments if to take into account the relatively low figures of previous years and the improved external environment. At the same time, the possibility to use budget stimuli remains limited because the EDB countries’ budgets are not sufficiently adapted to lower and volatile raw material prices.”
The authors of the review believe that economic growth in Russia may improve from 0.8% to 1.1% by the end of the year. The forecast was changed based on economic activity data and as a result of a revision of oil price estimates in view of global energy market trends that emerged in Q1. The forecast for Belarus’ GDP growth from minus 0.5% to plus 1.3% by the end of 2017 was improved because of faster than expected economic recovery in Q1 and the entering into an agreement on gas prices and oil supplies from Russia. Kazakhstan’s GDP forecast was raised from 2.3% to 2.8% due to stronger external demand and the fiscal deficit widened to rehabilitate the banking system. More optimistic foreign trade expectations and revised fiscal impulse were the main arguments for improving the Kyrgyz Republic’s GDP forecast for 2017, from 3.6% to 4.0%. Tajikistan’s economic growth outlook was revised from 6.7% to 6.2% because of the worsened situation in the banking sector.
“The key risk until the end of 2017 is that, after a period of appreciation of foreign exchange rates in some of the EDB countries, raw material markets can become volatile again,” the review says. “The events in early May in Russia and Kazakhstan’s financial markets show that, after having strengthened significantly in the previous months, the national exchange rates become more sensitive to the growing volatility of oil prices. Apart from oil price fluctuations and the fact that some currencies in developing markets are overly appreciated, an increase in FRS rates may exert additional pressure on currencies in emerging economies.”
Eurasian Development Bank (EDB) 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. EDB’s charter capital totals US $7 billion. 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. -0-
