Fitch Ratings Opinions On GDP 2022 Commonwealth Of Independent States Growth

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CIS Nations Show Positive Growth, Russia and Belarus Negative

Fitch Ratings have released new figures for the Commonwealth of Independent States (CIS) trading nations amid the conflict between Ukraine and Russia. The CIS includes Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, and Uzbekistan. It differs from the Eurasian Economic Union (EAEU) in that the EAEU is a multilateral free trade bloc, whereas the CIS nations have bilateral trade agreements between them. Of the CIS nations, Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia are also members of the EAEU, and free trade will be the preference between them.

Fitch have said that it expects damage from the war to cause a 10% contraction for Belarus this year due to its significant trade links with Russia, Western sanctions, and challenging financial conditions.

Fitch said it revised down economic growth estimates across the CIS region for 2022 but added that oil and natural gas producing and exporting countries will benefit from higher prices.

Fitch stated that “This is most apparent in Azerbaijan, which exports gas to Europe and will benefit from strong demand and higher prices. Turkmenistan currently exports all gas under long-term contracts with a lag in the pricing structure, meaning that much of the price impact will be felt in 2023.”

Fitch anticipates Armenia, Azerbaijan, Georgia, Kazakhstan, Turkmenistan, and the Uzbekistan economies will grow in 2022, but cut their estimates slightly to them achieving 4% GDP growth.

However, Fitch revised up inflation forecasts for all CIS countries, stating all are expected now to have average inflation rates of more than 8.5% in 2022, due to a combination of higher food and energy prices, and exchange-rate depreciation. Fitch ceased offering opinions on the Russia market on March 15 following a ban by the European Union on providing credit ratings for the country. The Central Bank of Russia however has indicated that Russian 2022 GDP growth is expected to decline 8% and show negative growth of -4% while inflation is expected to average out at 18.9% while retreating to 8% by the year end.

Fitch have predicted that EU GDP growth will show negative growth of about 4% to reach an overall 2.1% growth in 2022, while EU inflation is also expected to rise to average about 5% during the year, the highest level since the Euro was created.

A combination of low growth and high inflation increases costs for businesses and reduces disposable income. This is known as stagflation and can usher in a prolonged period of persistent high inflation combined with high unemployment and stagnant demand in a national – or potentially the global – economy.

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