Publication: Monitor Volume: 3 Issue: 51

Evidence continues to accumulate indicating that declines in gross domestic product of the two largest CIS economies are coming to an end. Contrary to earlier forecasts, a recent statement by Ukrainian prime minister Pavlo Lazarenko suggests that Ukrainian industrial production grew by 1 percent during 1996. (Xinhua, March 11) This would suggest that preliminary official estimates of a 10 percent decline in Ukrainian GDP last year will be revised upwards. Likewise, Ukraine’s dollar trade turnover increased by 19 percent, to $37.8 billion. Lazarenko’s remarks followed similar statements made last week by Russian prime minister Viktor Chernomyrdin, who claimed that both GDP and retail trade (which often serves as a proxy for consumption spending) at the end of February exceeded February 1996 levels. (Interfax, March 6) Real personal income grew by 7 percent, while the number of people with incomes below the subsistence level fell some 14 percent. Consumer price inflation in both countries during the first two months of 1997 averaged about 2 percent, suggesting that last year’s progress with macroeconomic stabilization continues into 1997.

Of course, both economies continue to face serious structural problems, particularly in the largely unreformed state enterprise and financial sectors. Still, if these figures are correct — and, if anything, these official numbers are likely to understate true production levels by failing to measure underground economic activity — they suggest that the 1996 economic recoveries recorded in most CIS countries are finally spreading to Russia and Ukraine. Since, moreover, Russia and Ukraine are each other’s largest trading partners, and since these two countries are also among Belarus’s and Moldova’s largest trading partners, economic recovery in Russia and Ukraine could have a beneficial impact on the entire Western CIS region. And although Russian and Ukrainian fiscal and monetary policies may become more expansionary in the coming months as the governments attempt to reduce wage and pension arrears, the growing output and low inflation figures suggest that such expansion, if moderate, need not be disastrous. The strong economic recoveries that began in Poland in 1992 and Albania in 1993 were accompanied by higher inflation rates than those currently observed in Russia and Ukraine.

Belarusan Opposition Predicts New Protests Despite Repression.