ECONOMIC GROWTH IN RUSSIA PROVOKES GROWTH IN NEIGHBORING COUNTRIES
The CIS became a world’s leader according to the speed of GDP growth among the economic alliances. According to the EBRD, in 2006, GDP growth of the CIS countries will amount to 6.9% and will remain on such level in the next few years. The main locomotives of the CIS are Russia, Kazakhstan and Azerbaijan whose growth is based on raw materials export, consumption and growing investments. In its report the EBRD remarks that growth in such countries as Armenia, Georgia and Ukraine is provided by “strong money transfer flows.” Experts are not surprised by such conclusions and say that economic growth in Russia inevitable provokes growth in neighboring countries through capital of private individuals who earn money in Russia but spend it in the CIS countries.
In its report the EBRD says that economic growth of the countries located between Central Europe and Central Asia is getting increasingly provided by growing domestic demand. In general, economic growth in this region in full year 2006, will amount to 6.2%. Along with this, according to the EBRD, the CIS became the international regional organization with the highest speed of economic developing approaching 7% closely. For example, growth of economies of the Southeastern Europe is forecasted at a level of 5.9%, for Eastern Europe and Baltic republics the growth is forecasted at 5.3. According to the speed of growth the CIS outran also NAFTA countries (US, Canada and Mexico). Eric Berglof, senior analyst of the EBRD, remarks, “We have not expected such rapid growth of economies of the CIS countries.”
The EBRD expects that in 2006, Russia’s economy will grow 6.5%. All records are broken by Azerbaijan. Its GDP growth is estimated at 26%. Analyst Olga Belenkaya of investment company Finam comments, “Such growth happens primarily on account of the low base effect.” Agvan Mikaelyan, Deputy General Director of FinExpertiza, remarks, “The higher the GDP the smaller the influence of the change. For example, construction of even one plant in an industrially undeveloped country can lead to a noticeable growth of its economic parameters.”
Peter Westin, senior economist of MDM-bank, adds, “East European countries already demonstrated economic growth at the beginning of the 1990s. They were also going to become members of the European Union and NATO from the very start.” Westin added that at the beginning of reforms the CIS countries were in much worse position and the initial economic decline was more dramatic than decline in the East and Central European countries. He also says, “This partially explains rapid growth of the CIS countries now.”
According to experts, it would be more correct qualitative parameters like GDP per capita. Westin explains, “In the East and Central European countries it amounts to $10,000, whereas for CIS countries it amounts to $1,684.”
In its report the EBRD remarks that growth of Russia’s economy is conditioned by consumer boom, as well as by growing foreign investments. The EBRD insists that the nearest task of Russia is diversification of economy enabling the country to reduce dependence on raw material export. As to the other CIS countries not rich with energy resources (Armenia, Georgia, Ukraine), the EBRD sees sources of their current economic growth in growth of private consumption and in cash transfer flows. Mikaelyan comments, “Almost all able-bodied population of these countries works in Russia. These are not only workers but also businessmen. Russian growth automatically turns into money that those who have earned it transfer to their countries and spend it there.” He continues that, for example, Georgia consumes $2-4 billion brought from Russia, Moldova consumes $1.-1.5 billion and Armenia and Ukraine consumer $1-2 billion each. The expert concludes, “Hence there is growth of consumption in these countries. Our economies are integrated through workers and economic growth of a number of the CIS countries is provided by growth of the Russian economy.”
<ref>Biznes, November 15, 2006
