IMF Likely To Cut Russia Outlook After Sanctions

The International Monetary Fund said on Tuesday that central, eastern and south-eastern Europe faced “an unusual constellation of risks” as the fund prepared to cut its forecasts for Russian growth for the second time in less than a month.

In a new report, the IMF said the region was expected to benefit as the euro zone recovers from its debt crisis, but the tension over Ukraine and market concern as the U.S. reduces monetary stimulus were creating high uncertainty.

“An unusual constellation of risks clouds the outlook,” the Fund said in its spring Regional Economic Issues report.

“Geopolitical tensions surrounding Russia and Ukraine, more challenging global financial conditions as monetary policy in advanced economies normalizes, and the possibility of protracted weak growth in the euro area could take a toll on the region’s growth prospects.”

Although the bulk of the region was forecast to see growth almost double this year to average 2.3 percent, Russia and Turkey – the region’s two biggest economies – were instead expected to slow.

Aasim Husain, the deputy head of the IMF’s European department, said tension between Russia and the West over Ukraine and the potential impact of sanctions were being studied now by an IMF team. That team is in Russia and due to report this week.

Only this month, the Fund cut its 2014 Russian growth for the third time running, to 1.3 percent. Its original projection was around 3 percent.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza