2021 will be a year of strong economic recovery for EDB member states

Bishkek, April 14, 2021 . / Kabar / . The Eurasian Development Bank (EDB) published its Macroeconomic Review with forecasts for the economic development of its member states — Armenia, Belarus, Kazakhstan, the Kyrgyz Republic, Russia, and Tajikistan — for 2021 and the medium term, The Times of Central Asia reported.

The Macroeconomic Review says that the year 2021 will become a period of strong economic recovery for EDB member states. The Bank projects the aggregated GDP growth rate of its member countries at 3.3%, after a 3% decline in 2020. The easing of social distancing measures and improvement of external economic conditions will be the key drivers of stronger consumer and investment demand. By the end of 2021, Kazakhstan and Russia’s economies will have grown by 4% and 3.3% respectively reaching pre-crisis levels.

Economic recovery in Armenia and the Kyrgyz Republic will be completed during 2022. The long recovery in these countries will be largely due to the depth of their economic recession in 2020 and smaller fiscal capacity. The economies of Armenia, Kyrgyzstan and Tajikistan will receive additional support from remittances in 2021. The Bank projects Armenia’s GDP to grow by 3.3%, the Kyrgyz Republic’s 3.9%, and Tajikistan’s 6.1% in 2021.

The EDB expects its member countries’ currencies to stabilise against the U.S. dollar in 2021. At the beginning of this year, currencies of countries in the EDB region of operations remain relatively stable vs. the US dollar. The national currencies are supported by rising oil prices. At the same time, the Russian rouble continues to be affected by geopolitical risks, which limits the room for its strengthening. In 2021, the average exchange rate of the Armenian dram against the U.S. dollar is projected at around 521, the Belarusian rouble 2.63, the Kazakhstani tenge 421.6, the Kyrgyz som 84.9, the Russian rouble 73.6, and the Tajik somoni 11.5.

For the Eurasian region, which supplies raw materials to the global market, the rise in prices for metals and energy is generally positive, the review says. Export earnings are on the rise, government revenues are growing, and economic sentiment is improving. These positive effects are primarily observed in Russia and Kazakhstan. Thus, if Urals oil prices remain close to US $70 per barrel in the second to fourth quarters of 2021 (more than 20% above the EDB’s base case projection), the Russian economy could grow by 3.7% in 2021, a 0.4 p.p. increase compared to the base case. Kazakhstan’s GDP growth in the optimistic scenario could reach 4.5% in 2021, which is 0.5 p.p. above the base case forecast. Thanks to close economic and financial integration ties, positive effects will spread to other EDB member countries.

Ruslan Dalenov, Chairman of the EDB Management Board, summarized the key current trends and forecasts, “First, the EDB member economies have adapted to operate in a pandemic environment. Second, in 2021 the Bank’s member economies are expected to recover strongly. The aggregated GDP growth rate of the EDB member countries is projected at 3.3%. The EDB member economies will grow even if the risky scenario takes place. Third, with the growing budget deficits to finance active support measures, the public debt of the EDB member states increased by US $45.4 billion. Debt parameters remain fairly stable. That said, at the end of 2020, Russia and Kazakhstan’s public debts amounted to about 18% and 30% of their GDPs, respectively.”