IMF warns ex-Soviet states of global slowdown risks

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Russia's economy will grow by 4.3 percent in 2011, the International Monetary Fund predicted in a report Tuesday, warning the entire ex-Soviet region of growing risks from the global slowdown.

The region of ex-USSR states is "particularly vulnerable to spillovers from the rest of world," the IMF said in its newest World Economic Outlook report, which predicated a "dangerous new phase" for the world economy.

Russia in particular is able to enjoy high commodity prices, growing slightly faster than the global average of 4.0 percent, but below the rate of most other developing economies including its ex-Soviet partners.

The Russian economy will grow by 4.3 percent in 2011 and 4.1 percent in 2012, the IMF said. The figures are lower than Russia's BRICS partners India and China, but slightly higher than Brazil and South Africa.

However, "net downside risks to the outlook have increased" in the region in the past six months due to the dependence of the region's larger economies on commodity prices, the report said.

Capital flows in Russia are still below their pre-crisis levels "because investors remain wary of the political uncertainty in the run-up to presidential elections (in March 2012) and the uninviting business climate."

The IMF predicted in its previous report five percent growth for Russia, warning it of rising inflation. Since then, prospects for oil prices have weakened, it said.

Energy exporters such as Russia and Kazakhstan need to "resist pressure to increase spending while there is still ample fiscal room and to improve the efficiency of public spending."

These recommendations echo those of the World Bank, which downgraded Russia's growth forecast last week to 4.0 percent and expressed concern with the country's growing budget for 2012-14.

Russia's own projection for economic growth in 2011 has been 4.2 percent, a target set by Prime Minister Vladimir Putin in April.

Most of the region's former Soviet republics that are not energy exporters will expand economically in "roughly the same pace as in 2010," the IMF said.

Armenia and Kyrgyzstan are expected to rebound from last year's respective poor harvest and social upheavals while Belarus' economy is likely to suffer from its unraveling currency crisis, it said.

© 2011 AFP

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