Low commodity prices and weak currencies

Against the backdrop of a weakening global economy and volatility in international financial markets, countries of the Europe and Central Asia region (ECA) are transitioning to a new normal. Oil-exporting countries in eastern part of ECA face the difficult adjustment to low commodity prices. Faster and more effective insolvency procedures, strengthened financial sectors, and higher absorption of European Union (E.U.) structural funds can contribute to rebound. This economic update consists of two parts: (i) economic outlook, comprising two chapters, and (ii) country pages. In part one, the first chapter describes the outlook for gross domestic product (GDP) growth, and then goes beyond GDP in a couple of important areas. It shows that terms-of-trade losses for oil exporters this year are much larger than changes in GDP. The second chapter establishes the link between oil prices and real exchange rates, both theoretically and empirically. Part two contains 26 two-page macro poverty outlook reports for ECA countries.