Page 4 - bne IntelliNews Georgia country report November 2017

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November 11, 2017 www.intellinews.com I Page 4
on average been modest and NPL levels remain elevated across much of the EBRD map.
Growth is expected to moderate somewhat in 2018, to 3%, in line with views of the medium- term growth potential of the region’s economies and reflecting a number of country-specific factors. Still, even this forecast represents an upward revision of 0.2 percentage points on the May forecast. Notwithstanding this acceleration, the average growth in the region is expected to remain slightly below that of emerging markets elsewhere with comparable per capita incomes.
Eastern Europe
While the economies of Central Europe are reaping the benefits of over two decades of reforms and in- stitution building to reach a critical mass, those of Eastern Europe are doing less well, stymied as they are by the need to make deep structural reforms.
Russia remains an “investment node” for most of the region and especially for the countries to the south and east of it. Russia’s fate has a direct impact on remittances sent home by migrant workers and hence the economies of some of the smaller and poorer countries.
Remittances from Russia to Central Asia, Moldova and the Caucasus stabilised in US dollar terms
towards end-2016 as the Russian economy returned to growth and the ruble appreciated in line with oil prices. Remittances rebounded by 21% y/y in the first half of 2017 but remained around 50% of the value recorded four years earlier. In local currency terms, remittances are only 9 percentage points below their peak levels of 2013 reflecting cumulative depreciations in recipient countries in recent years.
Russia is the largest of the EBRD countries and its gathering economic recovery, though restrained, has had a spillover effect on its neighbours, most noticeably in Belarus.
“Russia has now pulled out of recession after a cu- mulative contraction of 3% over the last two years. Russia is expected to see GDP growth of 1.8 and 1.7% in 2017 and 2018, respectively,” the develop- ment bank predicted, giving a forecast that is below those of some of the other International Financial Institutions (IFIs) and local investment banks.
“The increase in the oil price – compared with 2016 – has been a positive factor for Russia, and also for other commodity exporters and countries in Central Asia and Eastern Europe and the Caucasus that rely on Russia for remittance flows or as a destination for their exports,” the EBRD said. The gap in growth rates between the east and west of the EBRD region was now expected to narrow further, it added.