Download CIS: A resource-rich region experiencing the longest period of

Talking point
CIS: A resource-rich region experiencing the longest period of
economic expansion since 1991
November 19, 2007
It is common knowledge that Russia possesses an abundance of natural resources such as oil and gas. In the
context of rising commodity prices, however, other countries of the Commonwealth of Independent States* (CIS)
have also moved into the spotlight. The CIS, which is home to about 280 million people, is blessed with having
some of the largest deposits of oil, gas, coal and uranium in the world. Notably, high commodity prices have not
only fuelled revenues in the energy-exporting countries like Azerbaijan, Kazakhstan, Russia, Turkmenistan and
Uzbekistan but also in Armenia, Georgia, Tajikistan and Ukraine, which export cotton, copper and other metals,
for instance. The revenues from commodity exports have meanwhile also spilled over into other parts of the
economy and thus contributed to the longest period of economic expansion in the region since the countries
became independent in 1991. As a consequence, foreign investors and policy makers have started to take a
markedly increased interest in the CIS.
The IMF recently highlighted that, apart from high commodity prices, an increase in foreign private capital inflows
and productivity gains have boosted economic growth. Rising real income levels as well as better access to credit
have also led to a rise in consumption which in turn has become the main driver of economic growth. Of course,
rising commodity prices and terms-of-trade gains also pose challenges for the CIS, for instance with regard to the
diversification of their economies.
In our view, the near-term outlook for the region is quite favourable. Commodity prices are likely to remain high in
the near future and new oil and gas fields may become operational and boost output in some countries. Russia
obviously plays a key role in the region and affects the other countries’ growth via its import demand and flows of
private remittances. Apart from Russia, strong demand from Kazakhstan and further regional economic
integration could prove beneficial to smaller countries. In addition, financial sector deepening in the region as
envisaged for instance by the Regional Financial Centre initiative in Almaty could also underpin further growth,
especially since the gains may be especially large for less developed financial systems. Finally, there is still some
potential for further economic growth due to catch-up opportunities as the CIS still exhibits relatively low GDP per
capita.
Important challenges remain though with regard to diversification of the economy and governance structures.
Structural reforms and institutional developments have been improving but are still at a comparatively low level in
many countries. Certainly, the wealth created via the commodity price boom could help to further speed up the
transition process.
Our CIS chartbook allows a visual comparison of economic and social developments in the CIS.
See CIS chartbook
* The Commonwealth of Independent States is a loose confederation consisting of Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan,
Moldova, Russia, Tajikistan, Ukraine, Uzbekistan and Turkmenistan as an associate member. The CIS has little scope in supranational decisions but it
is more than a geographical term, possessing coordinating powers in trade and finance as well as lawmaking and security for these twelve of the fifteen
former republics of the Soviet Union.
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Thorsten Nestmann (+49) 69 9103-1894
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