Worsening global economic situation hinders CIS economic activity

PanARMENIAN.Net - United Nations forecasts inflation for the region to decelerate to 7.8 per cent in 2012, likely to decline further in 2013, according to “World Economic Situation and Prospects 2012” report released by the UN.

“Inflation for the region accelerated to 9.6 per cent in 2011, up from 7.1 per cent in 2010," the report said.

But headline inflation peaked in the Russian Federation and declined sharply in the second half of the year as the impact of the 2010 drought diminished. In Belarus, the devaluation of the rouble resulted in a sharp acceleration of inflation. In Kazakhstan, the one-off effects of customs union with Belarus and the Russian Federation resulted in price increases, as some imports became more expensive. According to the UN's economic outlook, more subdued growth due to global slowdown will lead to more moderate increases in prices in the region.

Although adjustments induced by the last recession have reduced reliance on external funding in Kazakhstan and the Russian Federation, thus lowering their vulnerability, foreign financing remains critical for the region, in particular for Ukraine and other non-energy-exporting countries that continue to have large current-account deficits. For some countries, the increased likelihood of slower global economic activity is likely to impair access to global capital markets. Moreover, the financial sector remains fragile in several economies. This is dampening domestic demand. In a pessimistic global scenario, the CIS economies would enter into a recession with GDP falling on average by 2 per cent, Trend News reported.