Outlook and Reforms to Promote Inclusive and

Sustainable Growth

Azim SadikovResident Representative

Armenia, Azerbaijan, Belarus, Georgia, Moldova, and Ukraine

2

Global Growth: Moderate and Uneven

World U.S. EuroArea

Emerging

Markets

Emerging Europe China Russia

2014 3.4 2.4 0.9 4.6 2.8 7.3 0.6

2015 3.1 2.6 1.5 4.0 3.0 6.8 -3.8

2016 3.6 2.8 1.6 4.5 3.0 6.3 -0.6

3

Shock 1: Lower Prices of Oil and Other Key Commodities

Global Commodity Prices(Index Values, 2005=100)

Source: IMF Primary Commodity Prices database.1/ Simple average of Brent, Dubai Fateh, and West Texas Intermediate prices.

Jan-11 Jan-12 Jan-13 Jan-14 Jan-1550

100

150

200

250

300

FoodMetalsCrude oil 1/Natural gas (Asia)

2000 04 08 12 16 200

20

40

60

80

100

120

Average Petroleum Spot Price(US dollars a barrel)

4

Shock 2: Slowdown in Russia

Real growth in Russia(Percent)

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020-5

-4

-3

-2

-1

0

1

2

3

4

5

Current projec-tions

Average growth 1996-2013

5

Russian Ruble, U.S. Dollar, and Oil Prices(Indices, Jan. 1, 2014 = 100)

Shock 3: Exchange Rate Movements

Sources: National authorities; Bloomberg; and IMF staff calculations.1/ Simple average of Brent, Dubai Fateh, and West Texas Intermediate prices.

40

60

80

100

120

Oil Price 1/Russia, USD/NC IndexUS NEER Index

Ukraine

Russia

Moldova

Georgia

Azerbaijan

Belarus

Turkey

Armenia

-30 -25 -20 -15 -10 -5 0 5

-26

-25

-10

-9

-9

-9

-6

1

Nominal Effective Exchange Rates

(Sep 15 - Aug 14 change, percent)

Amid A Tough External Environment, Economic Growth Slowed in 2015

6

Armenia Azerbaijan Georgia Belarus Moldova Ukraine-10

-8

-6

-4

-2

0

2

4

6

8

10

Real GDP Growth 2013-17(annual percent change)

Large and Persistent Current Account Deficits are a Key Source of Vulnerability

7

SV

N

HU

N

HR

V

CZ

E

BG

R

ES

T

SV

K

KA

Z

RO

M

PO

L

LIT

MK

D

LV

A

UK

R

MD

A

TU

R

BL

R

AR

M

BIH

GE

O

KG

Z

-12

-10

-8

-6

-4

-2

0

2

4

6

8 Current Account BalancePercent of GDP, 2014-2015 Average

Despite Strong Growth in the past, Unemployment Remains High

8

4 6 8 10 12 14 1610

15

20

25

30

Armenia

Azerbaijan

Belarus

Georgia

Moldova

Ukraine

East Asia

Europe&Central Asia

High Income

MENA

Sub-SaharanAfrica

World

Total and Youth Unemployment

Total unemployment (percent)

You

th U

nem

plo

ym

en

t (

per-

cen

t)

9

Scope to Improve Competitiveness and Governance

0%

20%

40%

60%

80%

100%

Structural Reform Indicators(in global percent rank)

Central and Eastern Eu-rope

Growth

Sustainable

Need an Economic Model that Promotes

Diverse

High

Inclusive

Growth

10

Macro-economic stability

Promote trade

integration

Enhance sector

reforms

Invest in infrastructure

Expand access to finance

Improve the business climate

Address skills

mismatches

Bold Reforms to Generate Growth and Create Jobs

12

Armenia Azerbaijan Belarus Georgia Moldova Ukraine0

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Top three obstacles to firms’ operations