Belgium, (Brussels Morning Newspaper) The European Bank for Reconstruction and Development (EBRD) has lowered its 2023 growth outlook for parts of Europe, Central Asia, and North Africa.
The bank pointed out that persistent inflation and high prices of natural gas will limit economic growth and erode wages in Eastern, Southeast, and Central Europe as well as parts of Asia and Africa, according to Reuters reported on Thursday.
According to the EBRD, economic growth in the region will stand at 2.1% this year, down from the 3% predicted previously. The bank pointed out that this is lower than the 2022 forecast of 2.4%.
EBRD’s region includes approximately 40 countries from Hungary to Kazakhstan and Tunisia, with the bank pointing out that average inflation in the area reached 16.5% in December, down from the peak of 17.5% in November.
According to the EBRD, “disinflation is likely to be more gradual than markets currently expect.”
EBRD chief economist Beata Javorcik pointed out “there is still uncertainty associated with the war in Ukraine, particularly for countries that are in geographic proximity.”
She added that poor performance of Germany, the largest economy in Europe, will lower demand for exports and cause regional growth to lose steam.
The bank pointed out that approximately four in five countries in the region run foreign trade and fiscal deficits, stressing that these deficits in Jordan, Romania and Turkey exceed 5% of their respective GDPs.
Earthquake in Turkey
EBRD cut its growth forecast for Turkey from 3.5% to 3% this year, stressing that expected effects of the recent earthquake are not included in the estimate.
It predicted that a “reasonable estimate” would be a loss of approximately 1% of GDP, pointing out that reconstruction efforts will provide an economic boost later this year.
Commenting on the war in Ukraine, EBRD noted that Russian GDP dropped 3.5% last year and predicted a drop of 3% this year, pointing to continued sanctions and fiscal pressures.
The bank expects Ukraine’s GDP to grow 1% this year, following decline of 30% last year.
“Unless there is a significant strategic change on the ground, growth in Ukraine’s GDP in 2024 is likely to be sluggish, but positive at least,” EBRD concluded.
