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. Last Updated: 07/27/2016

Investment Here More Risky

FRANKFURT -- Prospects for economic reform in Russia have worsened since parliamentary elections last December and investors should not risk large ventures there yet, Deutsche Bank Research analysts said Tuesday.


"We cannot yet with a clear conscience advise our customers to enter into large investments" in Russia, Otto Storf, head of East European research at the Deutsche Bank operation, told reporters while presenting a report on reform in Eastern Europe.


But he said the Russian market had strong growth potential and recommended small investments to gain a foothold there.


Several East European countries have achieved remarkable results after economic reform, the report said.


"After Poland, Slovenia, the Czech Republic and Hungary have also embarked on a sound economic upswing," it said.


Those countries could achieve annual economic growth of 5 to 8 percent by the late 1990s. But Russia's economy would shrink by 9 percent in 1994 after contracting by 12 percent last year and by 17 percent in 1992.


The analysts declined to make predictions for Russia for next year but said they did not believe in scenarios of economic catastrophe. "Russia will muddle through," said Andreas Gummich, a Russian expert at Deutsche Bank Research.


Russia's splintered reform groups had yet to find a common base from which to counter leftist and rightist extremists in parliament, the report said.


It predicted that the government would seek to buy votes by improving social benefits and propping up large state enterprises with Central Bank loans, which risks swelling budget deficits and escalating inflation.


The report predicted that Poland's gross domestic product would grow 3.5 percent this year and 3 percent in 1995; the Czech Republic would achieve growth of 2 and 3.5 percent in the two years; Hungary would grow by 1 percent this year and 3 percent in 1995, while Slovenia would grow by 2 and 3.5 percent.


Of $20 billion invested by foreigners in Eastern Europe by the end of last year, around $7 billion had flowed into Hungary, $3 billion into Poland and $2.5 to $3 billion into the Czech Republic. Russia lagged with less than $2 billion.