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Russia and the CIS

The Commonwealth of Independent States[2] is dominated by Russia, which accounts for about four-fifths of the region’s output. Russia, having previously been united with the others under the Soviet Union, still plays the leading political and economic role in the region.

The coronavirus pandemic and the impact of the lockdown measures implemented to halt the virus will likely mean that in 2020 Russia will experience the sharpest economic decline since the financial crisis of 2009. The fall in economic activity at home and abroad was further compounded by the low oil price and decreases in production. Russia seems, however, to whether the current economic turbulence better than most emerging economies. This is partly due to its robust macroeconomic fundamentals, with high international reserves, a balanced budget and a flexible exchange rate regime that has allowed the rouble to adjust to economic shocks. Inflation in Russia has been on the rise as a reaction to the weaker currency. Before the pandemic, Russia had recovered reasonably well from the 2015 recession, caused by Western sanctions in reaction to the Crimean crisis. Growth reached 2.5% in 2018 before falling back to 1.6% in 2019 as the world economy slowed.

The smaller CIS economies are largely dependent on commodity exports and remittances from Russia. As such, the weaker rouble will hurt regional economies through a reduced flow of remittances. Moreover, the global recession will depress commodity prices further reducing income from exports of cotton, aluminium, gold and other commodities. Oil exporting countries such as Azerbaijan, Kazakhstan, Russia and Uzbekistan are expected to suffer in 2020 due to oil price volatility.

[2] Member states include Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Uzbekistan. Ukraine and Turkmenistan participate in various CIS initiatives although they are not full members.

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