Russia is capable of withstanding the 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 World Economic Situation and Prospects 2015 (WESP) report of the United Nations Department of Economic and Social Affairs (UN DESA) says.
The report published on Monday says that the 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.
UN experts say that Russia "has substantial foreign exchange reserves to withstand current turbulences, but continued instability would affect investment for an extended period of time."
The report confirmed the preliminary forecasts given in the interim version of the document.In Russia, GDP growth in 2015 is expected to reach 0.2%, which indicates stagnation. In 2016, the situation will improve, but not so much, with growth of 1.2%.
Experts emphasize that the long-term forecasts provided are now problematic. The UN also reported a strong decrease in the volume of investments in Russia, caused by the rising cost of financing, as well as "the uncertainty associated with the sanctions imposed by the United States and the European Union".
However, net external demand and the devaluation of the ruble "prevented the Russian economy from falling into a recession". And the good situation on the labor market during the year played an important role, with the unemployment rate continuing to edge downwards and reaching historical lows during the year as the employment level increased.
Among the factors contributing to the rise in inflation, UN experts have named the counter-sanctions imposed by the Russian government in response to Western sanctions.
The aggregate gross domestic product (GDP) growth of the CIS and Georgia decelerated from 2.0 per cent in 2013 to 0.8 per cent in 2014, and is projected to strengthen modestly to 1.1 per cent in 2015 and 2.1 per cent in 2016.
