Updated 08:15 a.m. Moscow Time
MOSCOW, September 18 (RIA Novosti) - The European Bank for Reconstruction and Development (EBRD) has revised the Russian economy growth forecast for 2015, expecting the GDP to decline by 0.2 percent instead of the earlier predicted 0.6 percent growth, according to the bank's press release.
The bank expects the economy to stagnate in 2014, with zero GDP growth attributable to the sanctions introduced against Russian banks and companies.
"We are revising the 2015 growth forecast to a mild contraction of -0.2 per cent, as sanctions take effect, while fiscal room is limited and high capacity utilisation limits the long term effects from any fiscal or monetary stimuli," the bank said.
In the medium term, a resolution of the geopolitical crisis would be required for the Russian economy to grow.
"Recovery after the potential lifting of the sanctions will be protracted as investor confidence and business relationships will have to be rebuilt," the bank noted.
As for the long-term forecast, according to EBRD Russia will need to continue improving the business climate at both a federal and a regional level. It will help attract technologies, improve productivity and reduce dependence on commodities.
The Russian Ministry of Economic Development predicts a GDP growth of 1.2 percent in 2015, while the Bank of Russia expects the country's economy to grow by 0.9-1.1 percent next year.
EBRD improved its forecast for GDP growth in Central Europe by an average of 0.3 percentage points. At the same time, forecasts for GDP growth in Estonia and Latvia were reduced to 1% and 3.2% respectively (previously the Bank expected a growth of 2% and 3.8% respectively).
"A deepening of the economic slowdown in Russia could pose a particular risk for those countries in eastern Europe and the Caucasus and Central Asia that rely heavily on Russian remittances", the bank said.
EBRD has revised the Ukrainian economy growth forecast for 2014 as well, expecting its GDP to fall by 9% instead of the earlier predicted 7% decline.