The economy of the Commonwealth of Independent States (CIS) continued its erratic recovery in the fourth quarter (Q4) 2017 on the back of higher oil prices and strong global growth, according to March 2018 estimate compiled by FocusEconomics FocusEconomics, a leading provider of economic analysis and forecasts for 127 countries in Africa, Asia, Europe and the Americas.
Despite likely slowing slightly in Q4, Russia’s economy continued to gradually recover from the 2015–2016 slump, positively reverberating across the region, the report added.
The country accounts for more than 75% of the region’s nominal GDP and is a major trading partner for most economies in the region, as well as a source of remittances. According to a more complete aggregate for CIS countries’ economic output for Q4, the region expanded 2.2% annually in the quarter, a notch below Q3’s 2.3% rise.
Data for Q4 revealed that Armenia expanded at a double-digit rate for the first time in nearly a decade, while Azerbaijan logged the first expansion—albeit a meagre one—in two years mainly due to higher oil prices.
Growth in Kazakhstan, the region’s second largest economy, lost some steam in Q4 but remained solid overall as growth benefited from new output at the Kashagan oil field. While details for the final quarter of 2017 are not yet available for the Russian economy, the full-year result for 2017 suggests that growth slowed significantly in the fourth quarter, despite higher oil prices. “Available data for the first months of the year suggests that regional GDP growth is stabilizing. Volatility in the oil market, large economic imbalances in some countries and a slow economic recovery in Russia are keeping regional growth subdued. Against this backdrop, our panel of analysts foresees the CIS economy expanding 2.2% annually in Q1”.
In the political arena, Russian President Vladimir Putin, who faces virtually no opposition, is set to win another six-year term in the 18 March election.
Putin’s victory would ensure a continuation of economic policies, and any major economic shift will be determined by the evolution of oil prices and new sanctions.
Azerbaijan will also hold presidential elections after President Ilham Aliyev called a snap election for 11 April, six months ahead of schedule. While opponents claim this move is intended to sideline them, Aliyev will likely extend his rule to 2025.
He has constantly won all the previous elections amid allegations of vote rigging. Similarly, on 25 March, parliamentary elections will take place in Turkmenistan.
With all three contesting parties claiming loyalty to President Gurbanguly Berdymukhamedov, no relevant political and economic changes are expected.
Regarding the three economies that are not included in the regional aggregate, the economies of Georgia and Turkmenistan experienced stronger growth in Q4 due to healthy dynamics in their external sectors.
The main blackspot was, once again, Ukraine, which saw growth slowing for the fourth consecutive quarter, hitting a one-and-a-half-year low in Q4.
The report also noted: “The conflict in the Donbass region, poor progress in economic reforms and a disappointing external sector weighed on growth in the quarter. Available data for Q1 show that activity kicked off 2018 on strong footing in Georgia and Turkmenistan”.
On a positive note, in Ukraine, industrial production gained steam in January, and the government approved IMF-mandated legislation to crack down on corruption on 1 March, according to the report.
OUTLOOK
While growth is set to accelerate this year in the CIS region mainly due to higher commodity prices compared to last year and strong global growth, risks to the 2018 economic outlook appear to be skewed to the downside.
The plunge in oil prices observed in early February following an equity rout in the U.S. highlights that volatility is back, following a long period of calm in financial markets. Heightened volatility in global financial markets could impact the region in the form of lower commodity prices, sharp currency depreciations or spikes in interest rates, threatening to derail the region’s economic recovery.
While the European Union and the United States decided in recent months to hold off on new economic sanctions against Russia, the threat continues to cloud the outlook for Russia and, by extension, the rest of the region. Regional GDP is seen growing 2.1% in 2018, unchanged from last month’s forecast.
In 2019, regional GDP is projected to also grow 2.1%. This month’s stable 2018 forecast reflects a lower projection for Russia that was offset by upgrades to the economic outlooks for Armenia, Azerbaijan, Belarus and Tajikistan.
Growth estimates were left unchanged for the Kazak, Kyrgyz, Moldavan and Uzbek economies. As for the three countries that are not included in the regional GDP aggregate, analysts downgraded Turkmenistan’s outlook, while the projections for Georgia and Ukraine were left unchanged.
Uzbekistan is projected to be the fastest-rising economy in the region this year, with a 6.2% increase. On the other end of the spectrum, Azerbaijan’s economy is projected to expand at the slowest rate, with expected growth of 1.6%. Among the region’s larger economies, Kazakhstan is expected to grow at the fastest rate (3.4%), followed by Belarus (2.1%) and Russia (1.8%).
African Eye Report
