19th Jan 2015 12:57
MOSCOW (Alliance News) - Falling price of oil and an embattled Russia are set to drag the economy of the emerging European and Middle Eastern nations into contraction this year, the European Bank for Reconstruction and Development said Monday.
The London-based lender predicted nearly 5% contraction for Russia this year, which was far worse than the 0.2% decline seen in September.
Overall economy in the emerging European and Middle Eastern countries was forecast to contract 0.3% this year, in contrast to 1.7% growth predicted in September. Growth was estimated at 1.6% for 2014.
"Further significant drops in the oil price would intensify liquidity and financial sector pressures in the Russian economy, with significant spill-over effects for Eastern Europe, the Caucasus and Central Asia," EBRD said.
"In addition, increased uncertainty in the Eurozone, including in the light of elections in Greece on January 25, can lead to heightened uncertainty for the CESEE region in particular. On the upside, terms of trade gains may give a larger-than-foreseen boost to the world economy and can help smooth the impact of the eventual normalization of US monetary policy."
The Ukrainian economy remains in a particularly precarious state, the EBRD said. The bank forecast 5% economic contraction for this year after an estimated 7.5% shrinkage in 2014.
Commodity exporting countries in the region were expected to see 3.8% contraction this year after 1% growth last year. Meanwhile, commodity importers were forecast to witness 2.4% growth following 2.1% expansion in 2014.
Copyright RTT News/dpa-AFX