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IMF: Ukraine Crisis Could Slow Down Growth In Eastern Europe


The IMF says the Ukrainian crisis has brought new risks for the region, with financial markets in Ukraine, Russia, Belarus, and Moldova coming under renewed pressure earlier this year amid concerns about sanctions against Moscow.
The IMF says the Ukrainian crisis has brought new risks for the region, with financial markets in Ukraine, Russia, Belarus, and Moldova coming under renewed pressure earlier this year amid concerns about sanctions against Moscow.
The International Monetary Fund (IMF) says the escalation of Ukraine's political crisis is putting Eastern Europe's economic recovery at risk.

In a report launched in Istanbul on April 29, the IMF says that growth is picking up in most of Central, Eastern, and Southeastern Europe (CESEE) in the wake of the eurozone recovery.

The report, titled "Spring 2014 Regional Economic Issues (REI) for Central, Eastern, and Southeastern Europe (CESEE)," does not include Russia and Turkey, but assesses the regional impact of international sanctions on Russia's economy.

It says the economic recovery of the region is expected to continue in 2014, though it will likely be weaker than previously expected.

Several countries -- among them the United States, the European Union, Canada, and Japan -- imposed sanctions on Russia after its annexation of Crimea, but the immediate market reaction was muted.

However, the report says the Ukrainian crisis has brought new risks for the region, with financial markets in Ukraine, Russia, Belarus, and Moldova coming under renewed pressure earlier this year amid concerns about sanctions against Moscow.

The report says that more sanctions and countersanctions may lead to a stronger impact on regional trade, remittances, and the banking sector.

It says some 40 percent of Europe's natural gas and one-third of its oil come from Russia, with dependency ratios even higher for most of Central and Southeastern Europe.

The IMF report says that Russia's neighbors -- such as Moldova, Belarus, and the Baltics -- would be severely affected by lower Russian growth. Central European economies -- Hungary, Slovenia, the Czech and Slovak republics, and Poland -- and some Balkan countries like Serbia and Bulgaria have only moderate export exposures to Russia and Ukraine.

The document also notes that for most countries in the region, real economic interaction with Russia is limited outside the energy sector.

The report concludes that overall CESEE growth is now expected to be lower -- at 1.9 and 2.6 percent in 2014 and 2015, respectively -- than previously estimated in the IMF's "World Economic Outlook" from October 2013.
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