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EBRD: CIS countries likely to be affected less by Eurozone debt market turmoil

Business Materials 22 July 2011 11:12
The European Bank for Reconstruction and Development (EBRD) has revised upwards its forecasts for economic growth for 2011 in the European emerging markets, the bank said.
EBRD: CIS countries likely to be affected less by Eurozone debt market turmoil

Azerbaijan, Baku, July 22 / Trend N.Ismayilova /

The European Bank for Reconstruction and Development (EBRD) has revised upwards its forecasts for economic growth for 2011 in the European emerging markets, the bank said.

However, according to the EBRD, increasing risks in the euro area could threaten the prospects for economic development in the region.

Recovery in the EBRD region continues with GDP growth expected to reach 4.8 per cent in 2011 before slightly slowing to 4.4 per cent in 2012. This assumes a relatively benign external environment in which risks from the Eurozone are contained, EBRD's recent report reads.

An escalation of the Eurozone crisis would pose serious risks to growth and recovery across the region, especially in south-eastern Europe and the new EU members.

The CIS countries are likely to be affected less by the Eurozone debt market turmoil. Energy exporters in the CIS would be hurt by Eurozone stagnation that could stem from the turmoil through its impact on commodity markets. The stagnation could result in lower demand for commodities including oil and gas, reducing their currently high prices.

Capital inflows into the region were stronger in the first quarter of 2011 than in most of 2010 thanks to a sustained increase of portfolio inflows since the last quarter of 2010. Nevertheless, FDI still remains the main form of capital inflows . Higher frequency data, however, suggest a slowdown in the second quarter .While bond fund net inflows into the region remained around zero in April and May, equity funds showed a sharp outflow in May after inflows in the first four months of 2011.

Economic growth in the region has been accompanied by rising inflation particularly in Eastern Europe, the Caucasus, and Central Asia, fuelled both by external factors in the form of higher food and commodity prices, and by increasing core inflation as domestic demand strengthens.

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