EBRD FORECASTS PRECIPITOUS SLOWDOWN IN ECONOMIC GROWTH IN 2009

ARKA
Nov 26, 2008

YEREVAN, November 26. /ARKA/. European Bank for Reconstruction and
Development forecasts that economic growth in the EBRD-embraced
countries would precipitously slow down in 2009.

In its report, the European Bank for Reconstruction and Development
urges those countries where it sends its investments to make every
effort to support their banking system, since now everything will
depend on the situation in region’s banking system.

The EBRD predicts growth slowdown to 6.3% (7.5% in 2007) and further
three-percent slowdown in 2009.

Erik Berglöf, the bank’s chief economist, said that continuing
economic growth at the initial stage of the crisis showed how
successful the reforms were.

But now the region found itself in more complicated foreign economic
situation.

Bergl öf thinks that transition economies will go through new trials,
such as outflow of capital from developing markets and insufficient
readiness for risks and recession in member countries of Organisation
for Economic Co-operation and Development.

The expert also thinks that quick slowdown will weaken impacts of
inflation factors.

He said that developed and transition countries should coordinate
their stabilizing measures.

Berglöf said that considerable reduction of outside financing may
make impact the slow down as well.

He said that some countries suffer from payment balance deficit ami
d accumulating foreign debt.

As a result, these countries may face considerable output reduction,
if inflows of capital reduce.

The report points out that deterioration of the situation in financing
can lead to decline in credit expansion.

This can have devastating consequences on transition economies.

The report also points out certain factors that can help the region to
avoid such a negative scenario or at least resist heavy consequences.

Fore example, state debt reduction that began in 2000 will enable
governments to make large interventions more flexible.

The authors of the report say that in recent years, investment
environment improved, and flexibility of labor market will make it
possible to go out of recession under growth resumption.

The report says market reforms were being steadily implemented in
Southeast Europe, some CIS countries and Mongolia in the past year.

Some countries such as Belarus and Turkmenistan singled out for
sluggish reformation have taken positive steps for opening markets
and lowering the role of the state.

Considerable progress is seen in Balkan countries seeking EU
membership.

Taking into account close connection between reforms and economic
growth, the EBRD experts believe that the region can stand the
short-term market volatility and see prospects of long-term
growth.

–Boundary_(ID_jAth3zgzJMlYIACs XvOF0w)–