The European Bank for Reconstruction and Development (EBRD) said Nov. 8 that former Soviet states are on course to register record-high annual economic growth this year. "Economic growth across the EBRD region is expected to hit a record high this year but the global credit crunch that began this summer could result in slower growth in the longer term," it said in its Transition Report 2007.
The EBRD has forecast average growth of 7% in its countries of investment in 2007, which compares with a rate of 6.9% for 2006. Growth was forecast to moderate to 6.1% in 2008, it noted. "Economic growth across the transition region (in 2007) has been underpinned by ... strong domestic demand, rising investment including foreign direct investment, significant remittances from workers abroad, rapid growth in domestic and foreign bank lending and, in some cases, high energy prices," the report said.
It added that the broad economic outlook remained favorable for the transition region, while the EBRD also noted that it was "in the relatively enviable position of facing the recent financial market problems from a position of economic strength." But the report added that the fall-out from the crisis-hit U.S. mortgage market was nevertheless "likely to have an impact" on growth across transition states owing to rises in the cost of external finance and a reduction in foreign loans being made available.
"This might help the overheated economies in the transition region cool down; however, in a less benign scenario, countries with high external funding needs may experience a stronger economic downturn," the report added.
Copyright Agence France-Presse, 2007