EBRD: Russia-Ukraine crisis threatens recovery in transition region

The European Bank for Reconstruction and Development (EBRD) said on May 14 that the continued tension between Russia and Ukraine could have a significant negative impact on the economic recovery of the countries in the region covered by the bank.

In its latest economic forecast report, EBRD said that “events in Ukraine/Russia have significantly increased geopolitical and economic uncertainty, with direct negative effects on the economies of Ukraine and Russia and potentially wider implications for the region as a whole.”

The bank said that the outlook for growth in the transition region – EBRD was set up in 1991 to spur transitions to market economy in the former countries from the communist bloc – had “materially deteriorated” since its previous economic forecast report in January, “dashing hopes that the continuous decline in the region’s growth rate since 2011 would be reversed in 2014.”

EBRD’s baseline scenario now envisions economic growth of 1.4 per cent in region, down from 2.3 per cent in 2013, compared to the bank’s forecast of 2.7 per cent that it made in January.

“The negative spillovers are expected to be largely contained to the neighbourhood of Russia and Ukraine under our central scenario, though several central and south-eastern European economies will also see some impact. A modest pickup to 1.9 per cent is possible in 2015 provided that the Ukraine/Russia crisis does not escalate,” EBRD said.

To read the full story, click here. To read the full report, visit the EBRD website.

(Photo: Zsuzsanna Kilian/sxc.hu)