EDB: The basis for restoring the economic growth of EDB countries is becoming more stable and diversified

ArmInfo. The basis for  restoring the economic growth of the countries of the EDB is becoming  more stable and diversified as, along with the restoration of  investment and the increase in exports, there is also stabilization  and recovery in the consumer sphere.

This is stated in the monthly  Macro overview of the Eurasian Development Bank. According to  analysts of the bank, among the tendencies of the past few months in  the development of the economy of the EDB countries, it can be noted  that the situation in the consumer segment improved, which was  observed practically in all countries of the region. Thus, in July,  all the countries of the region demonstrated positive growth rates of  retail trade turnover: in Russia - 1% y/y, in Belarus - 4.9% y/y, in  Armenia - 3.2% y/y, in Kazakhstan - 9,2% y/y, in Kyrgyzstan - 3.1%  y/y, in Tajikistan - 5.2% y/y. In part, this kind of dynamics evolved  both through the restoration of wages and the growth of lending  activity in the consumer segment. At the beginning of August,  consumer lending increased in Belarus by 15.4% y/y, in Armenia by  12.6% y/y, in Kazakhstan by 6.2% y/y, in Kyrgyzstan by 36.7% y/y, in  Russia by 7.1% y/y. At the same time, nominal wages grew in all EDB  countries in annual terms and only in Kazakhstan there were negative  growth rates in real terms in relation to the corresponding period of  2016. The improvement of economic dynamics in EDB countries is  reflected in the improvement of forecasts on ratings, which was  already announced earlier on the Russian economy and is now reflected  in other countries of the region. Thus, Moody's confirmed  Kazakhstan's sovereign rating at the level of and raised the  country's rating outlook from negative to stable. The experts of the  agency explain the increase in the forecast of the country rating by  the fact that the economy, budget and banking system of Kazakhstan  have adapted to the structural decline in oil prices. The rating  agency also positively estimated the recapitalization of the banking  system, launched in the country. In addition, Tajikistan received the  first credit ratings for the purpose of placing Eurobonds. Moody's  agency rated Tajikistan's credit rating at (B3, Outlook Stable), while S & P rated Tajikistan's  credit rating at B-/stable. Fitch Ratings has maintained the  long-term issuer default ratings of Belarus in foreign and local  currency at , changing the forecast to positive from stable. At  the same time, the agency notes improvement in Belarus' access to  external financing and an increase in international reserves, which  reduces financial risks for 2017 and 2018. The safety factor for  economic growth and restoration of consumption of EDB countries is in  the conditions of maintaining higher rates in the largest countries  of the region, Achieving record low inflation levels will create  opportunities for strengthening credit activity. From the side of  budgetary policy, the reserves for stimulating the consumer sector  look somewhat more limited, but here, on the horizon of the next  half-year, measures are possible to increase social payments and  support the restoration of real incomes of the population. An  important factor of support for the consumer is the stabilization of  exchange rates and a reduction in inflation, an increase in the  remittances of migrants, and a relatively low level of unemployment  in the largest countries of the region (Russia and Kazakhstan). The  key risks to the recovery dynamics of consumption are external shocks  associated with the price situation on the world commodity markets,  as well as the persistent problems of bad debts in the banking sector  of a number of EDB countries.

Noting the trends in the Armenian economy, EDB analysts drew  attention to the continued economic activity, as evidenced by the  dynamics of the economic activity index, whose growth in July rose to  7% by July 2016 (5.1% y/y a month earlier). Since the beginning of  the year, the growth rate was 6.2% y/y (3.6% a year earlier). The  main positive contribution in July 2017 against the background of the  restoration of external and internal demand was made by industry (an  increase of 14.3% y/y), trade (10.5% y/y) and the volume of services  (17.2% y/y). In the field of negative values, the dynamics of  agriculture returned, the fall in which in July amounted to 4.3% y/y.  In January-July 2017, agricultural output fell by 2.1% compared to  the same period in 2016, which is mainly due to climatic factors. The  fall in construction continues to slow down and in July was 3.9% y/y  (a drop of 4.4% y/y a month earlier). Retail turnover continues to  increase (an increase of 3.2% y/y in July). Support for consumer  activity continues to increase the volume of remittances, growth of  salaries and loans to the population. Since the beginning of the  year, the increase in retail turnover was 5.7% compared to the same  period in 2016.

Against the backdrop of growth in economic activity, the trade  balance deficit continues to expand, which for July increased by $  149 million to $ 976.6 million from the beginning of the year  (deficit of $ 708.3 million in January-July 2016). The main reason is  the high growth of imports (an increase in July by 45.1% y/y). At the  same time, export volumes continue to show double-digit growth rates,  having increased by 25% y/y in July.

The slowdown in annual inflation for July 2017 to 0.9%, from 1.1% a  month earlier, was supported by a greater seasonal decline in prices  for agricultural products than in the same month of 2016. In July,  the neutral impact on the level of prices from imported inflation  remained. In the remaining months of this year, the gap between the  actual level of inflation and the Central Bank's target point is  expected to narrow.  According to the EDB's forecasts, inflation at  the end of 2017 will be 2.3%. To reach the target trajectory for  inflation, the Central Bank Board on August 15 made a decision about  keeping the refinancing rate at 6%. In the absence of external and  internal shocks, the Central Bank allows the preservation of the  refinancing rate at the current level in the short term. Accelerating  the growth of remittances.

According to the Central Bank of Armenia, the increase in remittances  of individuals in USD terms increased in July 2017 to 20.3% y/y after  9.1% y/y a month earlier. In total in January-June 2017, the volume  of money transfers in dollar terms exceeded the level of the same  period in 2016 by 17%. The positive dynamics of remittances is  expected to remain until the end of 2017, which will continue to  contribute to the growth of consumer and investment activity.