UPDATE 1-IMF sees growth cooling in Russia, emerging Europe

(Updates with World Bank comments)

WASHINGTON, April 9 (Reuters) - Economic growth in Russia and emerging European economies will likely cool this year as financial market turmoil curbs access to credit and demand for oil, the International Monetary Fund said on Wednesday.

In its World Economic Outlook, the IMF said growth in the Commonwealth of Independent States was expected to ease to 7 percent this year from 8.5 percent in 2007. Risks to the outlook were tilted to the downside.

"A sharper-than-expected slowdown in the global economy would likely lead to a decline in oil and commodity prices, a key driver of regional growth, and could adversely affect external financial conditions," the IMF said.

Turmoil in global financial markets has begun to affect most countries in the region. "In Russia and Ukraine, where banks borrowed heavily in international markets to finance rapid growth in domestic lending, spreads on external debt have widened," the IMF wrote.

The fund stressed that reining in rising inflation was the "most immediate challenge" for policy-makers, and pricing pressures would likely persist unless macroeconomic and income policies are tightened.

"The failure to act swiftly to contain inflation pressures could result in wage and price expectations ratcheting upward, putting at risk the hard-won gains from earlier disinflation policies," the IMF wrote.

In emerging Europe, growth was expected to slow to 4.4 percent in 2008 from 5.8 percent last year.

The region is dependent upon foreign investment to power its growth, and tightening credit conditions, particularly in Western Europe, may curtail the flow of money.