Agência para o Investimento e Comércio Externo de Portugal


A sharp slowdown in Russia will reverberate across CIS and is seen driving regional growth to a three-year low this year. The VAT hike, low sentiment and stunted energy exports will dampen the Russian economy, while the majority of the region’s other economies are also seen slowing partly due to subdued external demand. Conversely, growth should edge up in Azerbaijan.

Russia Economic Outlook

A preliminary estimate revealed growth plunged in the first quarter of the year, recording one of the worst readings since the economic downturn in 2015-2016. Although a detailed breakdown is not yet available, the VAT hike, rising inflation, downbeat sentiment and stunted export growth—due to a relatively warm winter in Europe and oil production quotas—likely all combined to stifle growth. Available data for the second quarter is mixed, with industrial production output surging in April while retail sales lost steam. Meanwhile, all eyes are on the upcoming OPEC+ meetings scheduled for late June and whether oil production cuts, which are currently set to expire, will be extended.  

Growth is seen slowing notably in 2019 on dampened household spending and limited oil exports. That said, the economy should regain some momentum in H2 as inflation recedes, which would open the door for policy easing. Government spending on Putin’s “national projects” could boost the economy ahead, although reports suggests that the programs are off to a slow start.

FocusEconomics panelists see growth at 1.4% in 2019, which is unchanged from last month’s forecast. In 2020, GDP is seen increasing 1.8%.


Kazakhstan Economic Outlook

National accounts revealed that the economy lost momentum in the first quarter. Manufacturing activity languished in the doldrums on a slowdown in key trading partners, while electricity supply swung to decline and the expansion of the services sector softened. Turning to the second quarter, a 4.1% rise in the short-term economic indicator for January–April suggests growth remained solid at the start of the period. The expansion was fueled by higher oil prices and a likely boost in exports, thanks to a weaker tenge, which should have kept the current account in surplus. This countered the impact of a continued weakening in the industrial sector. Prevailing uncertainty on the political front ahead of the 9 June snap election, however, has spurred sizable capital outflows, which has in turn led to depletion of reserves and a further depreciation of the tenge.

Reduced oil output, due to overhauls at the three main oil fields, is expected to soften the economy’s expansion this year, while challenging external conditions weigh on export growth. Domestic demand should remain buoyant, however, with the fiscal stimulus program buttressing private consumption and looser credit conditions boosting fixed investment.

FocusEconomics analysts expect GDP to increase 3.5% in 2019, which is unchanged from last month’s estimate, and 3.5% again in 2020.


Ukraine Economic Outlook

In the first quarter, the economy grew at the weakest pace since Q4 2017. A sharper drop in industrial production seemingly drove the deceleration, chiefly due to contracting manufacturing activity. Turning to Q2, growth appears to have recovered somewhat. Industrial production rebounded in April on a recovery in manufacturing, and mining and quarrying output. Furthermore, a jump in consumer confidence, surging retail sales and a stronger hryvnia bode well for household consumption. In the political arena, on 20 May, the newly-inaugurated President Zelensky called for snap parliamentary elections to be held in mid-July, in an attempt to capitalize on his political momentum. Following the announcement, the IMF reportedly agreed to release the next tranche of financing after the election, providing much-needed reassurance to foreign investors.

Frailer external demand and significant political uncertainty stemming from twin elections are likely to curb growth this year. However, despite decelerating from 2018, the overall expansion should remain healthy, as tightening labor market conditions, moderating inflation and a less tight monetary policy environment continue to support consumer demand.

FocusEconomics panelists see GDP growth of 2.7% in 2019, which is unchanged from last month’s forecast, and 2.9% in 2020.

CIS Countries Monetary & Financial Sector News

Inflation in the CIS economy inched down to 5.3% in April (March: 5.4%), largely reflecting lower price pressures in Russia. Inflation is seen easing in the coming periods due to modest demand pressures and stable exchange rates. Outside of the region, inflationary pressures built in Ukraine in April amid higher transport and food prices. 

Moderate price pressures and stable currencies have allowed the regions’ central banks to hold or cut policy rates recently. At their latest meetings, policymakers in Armenia, Belarus, Moldova and Russia made no changes to rates. That said, Russia’s Central Bank did state that rates could be lowered ahead, while policymakers in Azerbaijan and Kazakhstan trimmed rates.

The region’s currencies were largely stable in recent weeks, supported by firm oil prices, central banks’ policies and solid external buffers. Meanwhile, Ukraine’s hryvnia depreciated moderately on political fears. Looking ahead, CIS currencies are seen appreciating modestly this year despite the tense geopolitical backdrop.


See the Full FocusEconomics CIS Countries report