A recent report by the European Bank of Reconstruction and Development (EBRD) notes that the impact of the global economic crisis on the emerging economies in Europe and Central Asia will be dramatic. On average the EBRD estimates that these emerging economies will contract by about 5.2 percent in the current year. The bank’s figure for Russia now stands at 7.5 percent.

The previous forecast by the European Bank of Reconstruction and Development prepared in January 2009 stated that the economies would still continue to grow at the rate of 0.1 percent, compared to 4.2 percent in the past year. The revision of the forecast was necessary because the financial crisis led to significant falls in industrial production and a sharp drop in domestic demand.

According to the European Bank of Reconstruction and Development, the rate of defaults on consumer and commercial loans has not reached its maximum yet – neither have unemployment figures.

At the same time, there is some basis for asserting that recovery will begin in the near future. The fall of industrial production has become less rapid, and global financial markets are gaining greater stability.

The estimates for Russia were revised from +1 percent growth to 7.5 percent decline following the sharp fall of the country’s economy in the first months of 2009. Based on the data of the Economic Development Ministry, Russia’s GDP went down by 9.5 percent in the first quarter of the year.

Still, some market analysts remain optimistic, noting several positive developments that came to the forefront in the recent weeks. The price of oil rose significantly. Financial markets attract more investors. The value of the Russian currency has become stable. Experts also say that during an economic crisis, forecasts usually try to catch up with the existing economic realities and offer little in the way of anticipating economic conditions. If positive trends persist, business people are not likely to find the forecasts reliable.

The report of the European Bank of Reconstruction and Development emphasizes that the Baltic states will experience the greatest economic impact from the crisis. The economy of Latvia would contract by 13 percent, of Lithuania by 11.8 percent, and of Estonia by 10 percent. Ukraine’s economy would similarly shrink by 10 percent, according to the EBRD. The estimates coincide with the figures provided by the International Monetary Fund. In Ukraine, the problems of the banking industry are made worse as a consequence of political instability in the country.

Estimates of economic activity in the region from other global economic organizations are also pessimistic. World Bank analysts predict that the emerging economies will contract by 2 percent this year. According to the International Monetary Fund, a 3.7 percent contraction will take place in East-Central Europe. For C.I.S. states, the estimate is 5.1 percent.