Russia to see 'modest' economic recovery: IMF

6th October 2010, Comments 0 comments

Russia's economy will enjoy a "modest recovery" growing by 4.0 percent in 2010 and 4.3 percent next year after a record heatwave, the IMF said on Wednesday.

A summer of record high temperatures and wildfires can "detract from near term growth" in Russia, but recovery will be led by "self sustained consumption," said the World Economic Outlook by the International Monetary Fund.

High commodity prices are the driving force of recovery in the region, but "the ongoing rebound still depends on policy support," and reforms in the public sector.

Countries in the post-Soviet CIS region on average will grow by 4.3 percent this year and 4.6 percent next year, but their performance will depend on Russia due to trade and remittances from the region's biggest economy.

Kyrgyzstan is the only regional economy to contract this year, by 3.5 percent after a bloody uprising and ouster of former president Kurmanbek Bakiyev, but the country's outlook for next year is growth of 7.1 percent.

Turkmenistan will have the highest growth in the region with 9.4 percent in 2010 and 11.5 percent in 2011, boosted by higher volumes of gas exports and "large scale investment."

Central Asia's biggest economy Kazakhstan is to grow by 5.4 percent and 5.1 percent this year and next year, it said. Ukraine will grow by 3.7 percent and 4.5 percent, and Belarus by 7.2 percent and 6.2 percent.

The region is vulnerable to changes in global commodity prices, and Russia's economy remains especially dependent on global financial market trends like volatility in capital flows.

The report applauded Russia's more flexible exchange rate regime, which has helped keep speculative capital out. Other economies, notably Kazakhstan, would benefit from making the exchange rate more flexible, as it can be an instrument in adjusting to shocks.

It would also be "critical" for Kazakhstan to work out a transparent strategy to handle bad debts to make the financial sector more healthy.

© 2010 AFP

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