EME Macro/Strategy: CIS plus – top growth in our markets, again

Our CIS frontier countries are set to remain on an enviable macroeconomic trajectory in the next two years. They are at the top of our WOOD universe growth outlook, with inflation trends mostly under control and solid reform plans for the coming years. In more detail, the available data for the second half of 2023E show a good economic performance across the CIS countries under our coverage, but more volatile, somehow, and generally on a moderating trend (albeit from very high levels). We see some moderation continuing in 2024E, although the economies in the region should remain a top growth performer. Concerning inflation trends, In October, inflation continued on a downward trend, but remained in double-digits in Kazakhstan and Uzbekistan; while Georgia has experienced low inflation rates as most of the year, significantly below the Central Bank’s target. While the inflation picture in Georgia is set to normalise next year, the inflation target is still one year away in Kazakhstan and Uzbekistan. Russia’s ongoing GDP recovery is set to affect trade positively, but the RUB volatility and the consequent CBR shift in stance are putting pressure on the regional central banks to maintain high real interest rates and maintain a cautious playbook. Our forecasts reflect the historically prudent monetary policy stance of the region. However, an argument could be made for a stronger reduction of positive real rates, adding upward risks to our GDP projections next year and in 2025E.