MOSCOW: Inflation in Russia will climb to 10.5% in 2016 but is expected down to 7.1% in 2017. Along with this, a return to GDP growth is expected by 0.7% in 2016 and by 1.8% in 2017, the UN Development Policy and Analysis Division (DPAD) said in the report titled World Economic Situation and Prospects 2016: Global Economic Outlook (WESP) published on Wednesday.
The United Nations’ experts said that Russia’s GDP contracted by 3.8% in 2015 and inflation climbed to 15.9%, three times against 2012. The Russian economy suffered from lower oil prices and developments around Ukraine, which resulted in capital outflows and reduced investment, they said.
The report pointed out that the ban on Russian food imports from countries that imposed sanctions on it is putting downward pressure on the Baltic countries along with Hungary and Poland. The Russian rouble halved its value between the beginning of 2014 and last October, the WESP said noting a tiny increase in efficiency of labour, characteristic for Russia. In 2001-2007 labour productivity in Russia stood at 5.4%, decreasing to two percent in 2009-2014.
UN experts believe that contracting output in the Russian economy had a depressing influence throughout the Commonwealth of Independent States (CIS), uniting former Soviet states. “Contracting output in the Russian Federation, the largest economy in the CIS, had a depressing influence throughout the region,” the report said.
“A decline in remittances, which almost fell by half in dollar terms, and other spillover effects, including reduced exports and investment from the Russian Federation, largely offset the impact of lower energy prices in the region’s small energy-importing countries,” it said.
The aggregate GDP of the CIS and Georgia contracted by three percent in 2015, according to estimates, but a return to growth is expected in 2016, increasing to 1.8% in 2017. At the same time, the WESP praised the role of the Eurasian Economic Union comprising Russia, Belarus, Kazakhstan and Kyrgyzstan. The Union “opens new possibilities for increased trade and investment in the region, although many aspects of the regional integration still have to be negotiated,” it said.
The world organisation’s experts say that in 2016 the global growth will reach 2.9% and 3.2 – in 2017. The WESP reads that “The improvement in global growth is also predicated on easing of downward pressures on commodity prices, which should encourage new investments and lift growth, particularly in commodity-dependent economies.”
The average Brent oil price “is expected to be $51 pb, before recovering to a higher equilibrium price of $62 pb in 2017,” the report said. Along with this, the experts say that a short-term forecast for the global economy “remains susceptible to a number of geopolitical tensions and risks,” including the crises in Afghanistan, Iraq, the Syrian Arab Republic, Ukraine and Yemen and the refugee crisis.
Besides, the WESP says that the United States Federal Reserve Board is expected to raise an interest rate after keeping it at the current rate of near zero over the past seven years. This “will put pressure on other economies to follow suit,” with deepening the capital outflows from developing countries and to toughen financial conditions throughout the world.
