Collateral Damage From Russian Recession Could Be Global

Monday, May 18, 2015
By Paul Martin

By Andy Tully
OilPrice.com
Sun, 17 May 2015

The European Bank for Reconstruction and Development (EBRD) sees modest economic improvement in much of Eastern Europe for the near future, but its outlook for Ukraine and Russia, which have been at odds for more than a year now, is much less optimistic.

According to the EBRD, the hostility between Russia and Ukraine will keep them in recession throughout 2015, despite a moderate economic expansion in the other 33 countries the EBRD has served since it was created in 1991.

For example, the economies of several EBRD countries are expected to improve this year thanks to lower interest rates not only in Eastern and Central Europe but also in the euro zone, which makes up their biggest market for exports.

Not so, however, for Ukraine, whose economy contracted by 6.8 percent in 2014 and is expected to contract by 7.5 percent this year, even worse than the 5.0 percent the EBRD anticipated four months ago. And Russia is expected to remain in recession through 2016 under the simultaneous pressures of low oil and gas prices and Western sanctions over its role in Ukraine’s political crisis.

The bank said the uprising by pro-Russian separatists in eastern Ukraine has severely disrupted the region’s economy. It said this trouble, along with “the negative impact of the depreciation of the hryvnia [Ukraine’s currency], tight economic policies, energy tariffs hikes and a continued contraction of credit are expected to maintain pressures on the economy this year.”

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