From 2015 January 2010, between the countries that since 2014 had created the Eurasian Customs Union (Russia, Kazakhstan and Belarus) and Armenia (since XNUMX), theEurasian Economic Union (EAEU), open to future membership of CIS markets (expected soon the entry of Kyrgyzstan). In a particularly delicate phase of relations between the CIS countries, due to the Ukrainian crisis and diplomatic relations between Russia and Western countries, the establishment of the EAEU marks an important step forward in the path of trade liberalisation, economic integration and institutional cooperation in the region .
In 2014, Belarus' GDP grew by 1,6% in real terms, with a limited acceleration compared to the 1% of the previous one. Internal factors of weakness and the worsening external situation, specifically the negative effects of the Russian-Ukrainian crisis, weigh on growth prospects. In the IMF Outlook for April, analysts predict for Belarus a drop in GDP of 2,3% in 2015 and -0,1% next year, while the World Bank sees a more pronounced decrease (-3,5% and -1%, respectively). In the first few months of the year, due to the depreciation of the currency, the Central Bank once again raised the reference rate, bringing it on several occasions to the current 25%.
The most recent forecasts see the policy rate at between 23% and 25% in 2015, while the Belarusian ruble has been allowed to depreciate from 11.000 to 15.000 against the dollar. At the same time, the path towards greater exchange rate flexibility was undertaken, linking it to a composite basket calculated as the geometric mean of the bilateral exchange rates of the local ruble against the Russian ruble (with a weight of 40%), of the dollar and of the euro (both with a weighting of 30%). In March the inflation trend rate was 16,1%. According to the IMF, the large depreciation of the exchange rate will bring the average rate to 22,1% in 2015; however, the Authorities forecast a progressive reduction of inflationary pressures in the second half of the year, with the expected trend at 16% in December.
The Belarusian economy is affected by periodic balance of payments crises (the latter in 2008 and 2011) which led to a large depreciation of the currency, conditions of hyperinflation and a substantial reserve drain. In 2014, despite the contraction of the current deficit, which fell to 5,1 billion from 7,6 billion the previous year, the balance of payments deficit doubled to 3,4 billion, from 1,7 billion. This deterioration reflects the reduction of substantial loans and aid received in 2013 from Russia and the Anti-Crisis Fund of the Eurasian Development Bank. At the end of 2014, foreign exchange reserves amounted to 2,9 billion, down to 2,4 billion in April 2015.
Added to these are 2,1 billion between gold and SDR, against an external financial requirement estimated by EIU equal to 21,2 billion. Belarus has a highly passive net external financial position (43,4 billion, 57% of GDP in 2014), while external debt amounts to 40 billion (51,6% of GDP). With the debt-to-GDP ratio set to increase significantly following the exchange rate depreciation. In April, Moody's downgraded Belarus' sovereign debt rating from B3 to Caa1, rating it at considerable risk of default, while S&P's confirmed the B- rating.
During 2014, Kazakh GDP growth slowed to 4,3%, from 6% the previous year. On the supply side, the slowdown reflects the deceleration of extraction and manufacturing activity, without forgetting the loss of the favorable base effect for agricultural production.
THEeconomy of Kazakhstan is feeling the effects of regional tensions through the relevant commercial and financial relations with Russia, of drop in the price of oil (with negative effects on tax revenues, purchasing power and investments) and the persistent difficulties of the banking system, where bad debts still amount to almost 30% of the total. These developments have led to a substantial downward revision of GDP growth estimates, currently envisaged by the Government and the European Bank for Reconstruction and Development (EBRD) equal to a modest 1,5%.
Inflationary pressures began to subside in the first few months of the year as the depreciation effect gradually wore off. The trend rate slowed down to 5,2% in March, with the expected average rate falling to 5%, from 6,6% in 2014. After the 18% devaluation of the tenge decided by the authorities in February 2014 (which brought the exchange rate against the dollar at 185 KTZ : 1 USD) and the abandonment of parity with the dollar in favor of a reference corridor of +/-3%. The real effective exchange rate appreciated broadly, accentuating the condition of overvaluation with respect to the equilibrium value highlighted by the IMF in the 2014 Art. IV Report (6%, with reference to the variance at the end of 2013).
In 2014 the current balance of payments surplus widened to 4,6 billion from 0,9 billion. The trade surplus, which rose to 35,6 billion (from 34,8 billion) more than compensated for the income account deficit (22,9 billion, due almost entirely to the remuneration of direct investments in the country). The financial account surplus rose to 7,4bn from 0,3bn (despite the slowdown in incoming FDI, which fell to 7,6bn from 9,9bn) supported by lower portfolio disinvestments and the growth of the short exposure of the private sector after the devaluation of the tenge. At the end of 2014, foreign currency reserves amounted to 21 billion and were lower than the 2015 external financial requirement, estimated by EIU at 34,5 billion. If the Sovereign Fund's foreign currency balances are included, the reserve cover ratio rises to 1,2. The rating of Kazakhstan's sovereign debt in foreign currency is considered "investment grade" by the main agencies (BBB by S&P's, BBB+ by Fitch; Baa2 by Moody's).
With reference to dynamics of exchanges between Italy and UEEA markets, in 2014 the most significant annual variations in imports were recorded in mineral products (-25%) and refined petroleum products (-29%), while among exports we note the contractions in means of transport (-49%), in textiles and clothing (-16%), various manufactured goods (-8%). In contrast, the growth of the sector of the goods should be noted pharmaceutical items (2,6% of the total) which saw an increase of around 28% last year. The stock of FDI in UEEA countries was 727 billion dollars at the end of 2013, equal to about 2,9% of the world total. Based on data from the Ministry of Economic Development, at the end of 2013 Italian FDI in the region was in turn equal to 7,3 billion. There are around 700 Italian companies operating mostly in the energy, agro-food, fashion, telecommunications and automotive sectors.
