LONDON, Jan. 21 (Xinhua) -- The European Bank for Reconstruction and Development (EBRD) Tuesday revealed in its quarterly economic report that the developing and frontier nations of Europe and central Asia will experience only slow growth during 2014.
Chief economist Erik Berglof told journalists that despite a return to growth in developed nations like the United States, the effect on the EBRD's nations was modest with growth of 2.7 percent predicted.
This is unchanged from the last quarterly forecast in November, and builds on growth of 2 percent in 2013, which had declined from 2.6 percent in 2012.
Berglof said, "There is a slow recovery ahead; we have seen a levelling off in Russia, in Eastern Europe, the Caucasus region, and the Southern Mediterranean."
"We foresee slow recovering growth rates and in Russia the rate will stay low. Russia is very important to nations in our region. As a whole for the region it is just a very modest increase," Berglof added.
Growth has been somewhat stronger in central Asia, and there is also strengthening growth in the eurozone area and the Baltic nations, said Berglof.
Exports are recovering very well across the EBRD nations and inflation is coming down, although there are risks of deflation, said Berglof.
Changes in core inflation, although not strong, is present in most nations, said Berglof, driven by cheaper food and energy costs.
The Central Europe and Baltics (CEB) region is forecast to grow at 2.2 percent this year, twice as fast as in the previous two years and reflecting the fact that a recovery is finally taking hold in Croatia and gaining momentum in Hungary, Poland and the Slovak Republic.
However, growth remains well below potential and Slovenia is expected to remain in recession on the back of high corporate indebtedness and the need for further bank recapitalization.
Recovery in South East Europe (SEE) will continue but growth rates will remain modest overall, at just 2.1 percent after 2 percent in 2013.
Several countries in the region face big fiscal challenges, as the combination of weak growth and the failure to rein in public expenditure has led to rising fiscal deficits and public debt levels.
Growth in Russia will only partially recover in 2014, to 2.5 percent from 1.3 percent last year. Commodity prices are no longer supporting growth and are limiting the scope for fiscal policy adjustment.
In Eastern Europe and the Caucasus, growth will strengthen to 2 from 1.2 percent. Ukraine is expected to post small growth after virtually no growth in 2012 and a 0.8 percent contraction in 2013.
Growth in Central Asia will remain relatively strong owing to a number of large natural resource projects in Kazakhstan, Mongolia and Turkmenistan. Growth is expected to decelerate somewhat in the Kyrgyz Republic and Tajikistan on account of weaker demand and lower expected growth of remittances from Russia.
Growth in Turkey is likely to moderate somewhat to 3.3 percent in 2014, from 3.7 percent, reflecting monetary tightening and an increase in financing costs linked to higher political risks which are pulling growth back.
The economies of the southern and eastern Mediterranean region, where the EBRD is now investing in four countries, are likely to grow slightly faster in 2014 at 3 percent after 2.7 percent last year. But the outlook is subject to a high degree of uncertainty as all countries in the region remain vulnerable to external shocks.