UPDATE: EBRD maintains forecast for Russia’s GDP growth of 1.2% in 2017

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NICOSIA, Cyprus, May 10 (PRIME) -- The European Bank for Reconstruction and Development (EBRD) has maintained its 2017 Russian economic growth forecast at 1.2% and expects the gross domestic product to expand by 1.4% in 2018, the bank said on Wednesday in its Regional Economic Prospect report.

The Russian economy started to grow after an about 3% cumulative contraction in 2015–2016, but investment activity is still restrained by economic uncertainty and a relatively high cost of financing. The gradual restoration of oil prices, household consumption and investment will support the Russian economic recovery in 2017 and 2018, the EBRD said.

But there are risks, including contraction of oil prices, the lack of reforms to improve business environment and support investment, geopolitical tensions, and prolongation of sanctions. Without significant reforms, low investment will limit long-term growth of the economy at 1–2% per year, the bank said.

Russian Economic Development Minister Maxim Oreshkin said in April that the country’s GDP may grow 2% in 2017.

INVESTMETNS INTO RUSSIA

EBRD President Suma Chakrabarti said in a briefing following the meeting of the bank’s board of governors that the board has not discussed resumption of investment in Russia, only legal aspects of new projects suspension.

“How did the meeting go? Attention was paid to legal aspects (of abandoning investment in Russia) and to financial results of the bank. The Russian Federation spoke about it. We did not discuss this at all. This was not the goal of our meeting,” Chakrabarti said.

In 2014, EBRD shareholders decided to freeze investment in new projects in Russia due to a tough geopolitical situation and sanctions imposed on the country by the U.S. and the E.U.

On Tuesday, Oreshkin said that suspension of financing hurts financial state of the EBRD and violates several regulations of articles of the agreement establishing the bank forcing Russia to seek a legal solution.

Pierre Gramegna, the EBRD’s Luxembourg governor and chairman of the board of governors, said that the board thinks that the ban violated no regulations. The board studied Russia’s request and concluded that the action was legitimate.

Chakrabarti also said that the decision was final and binding.

Oreshkin said after the meeting that Russia will focus on working with depoliticized institutions, like the Asian Infrastructure Investment Bank and the New Development Bank BRICS. It will also improve local development institutions like Vnesheconombank instead of the EBRD.

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