World Economy

UN: Russia Can Withstand Current Economic Turbulence

UN: Russia Can Withstand Current Economic TurbulenceUN: Russia Can Withstand Current Economic Turbulence

Russia is capable of withstanding current economic turbulence as it has substantial foreign exchange reserves, but further instability due to geopolitical tensions in the region will affect investment for an extended period of time, the United Nations World Economic Situation and Prospects 2015 (WESP) report says.

According to Russia’s TASS news agency the report published on Monday says that economic prospects for the Commonwealth of Independent States (CIS), a loose alliance of former Soviet republics, largely depend on the evolution of the months-long Ukrainian crisis.

The UN says Russia’s economic activity came to a standstill last year and reduced growth prospects throughout the region. However, net external demand and the devaluation of the ruble “prevented the Russian economy from falling into a recession.”

“The devaluation of the ruble, import restrictions and continuing energy export revenues led to a widening of the current account surplus, thus reducing pressures on reserves from growing capital outflows,” the report notes.

The UN predicts a near-zero growth in Russia in 2015, “with serious downside risks and the continued problem of capital outflows seen as major concerns.”

According to WESP, aggregate gross domestic product (GDP) growth of the CIS and Georgia fell from 2 percent in 2013 to 0.8 percent in 2014, and is projected to strengthen modestly to 1.1 percent in 2015 and 2.1 percent in 2016.

The report says the establishment of the Eurasian Economic Union (EEU) in January 2015, which requires further harmonization of economic regulation in the CIS area, “should bolster intra-regional economic ties in the forecast period.”

The Eurasian Economic Union is an economic and political bloc bringing together Russia, Kazakhstan, Belarus and Armenia, with Kyrgyzstan to join in May 2015.