Ukraine continues to do a fine job of muddling through the existing economic and financial issues. In the near term, the authorities appear still to have sufficient options to cover external gaps without a sharp UAH devaluation. The issue of delivering positive economic growth without major shocks ahead of the presidential elections remains top of the agenda.
Belarus’ situation has deteriorated further, while we see limited risks to its ability to service debt, which would require Belarus to find new financing options quickly, be it from China, Russia or the IFOs. Otherwise, a quicker BYR depreciation is likely, although the positive effect of this might be not of the magnitude seen in 2010-11.
Georgia’s political environment continues to disappoint, but we anticipate this situation being resolved after the October elections. Our medium-term view on Georgia remains broadly positive, with economic growth possibly requiring new long-term financing sources.
Azerbaijan and Kazakhstan continue to withstand global uncertainties with comparative grace, supported by oil prices, though both countries suggest the existing price levels are no longer sufficient to ensure massively positive external balances and worry-free budget executions. Both might come to the international capital markets over the next 12-18 months, in our view.