● EBRD degrade its regional growth forecast to 2.2% for 2023
● Inflation reaches double-digit levels in more than 3/4 of EBRD economies
● In 2023, according to the forecast, the economies of Central Asia will grow by an average of 5.2%, in 2024 – further growth of 5.4%
● High interest rates, inflation and commodity prices can affect long-term regional growth.
Regional upgrowth forecast.
The European Bank for Reconstruction and Development, in its latest forecast “Regional Economic Prospects”, reported that inflation caused by high gas prices, as well as stricter financing conditions, is slowing growth in Eastern Europe and beyond. It is expected that the growth rate in the bank’s regions, which cover three continents, will be 2.2% in 2023, slightly decreasing compared to the forecast of 2.2% in February. It is predicted that as inflationary pressures gradually decrease, growth will accelerate to 3.4% in 2024, which is higher than the forecast of 3.3% in February.
Factors influencing the decline in the forecast for 2023 include: the economic impact of the earthquakes in February and the expected tightening of credit conditions later in the year in Turkey; the delay in reforms in the southern and eastern Mediterranean; as well as the effect of restrained growth in developed countries, persistent inflation and the complication of financial conditions in Central Europe and the Baltic States.
Growth in 2022 decreased to 3.3%, compared with 7.2% in 2021, before the outbreak of Russia’s war with Ukraine. A strong start to 2022, thanks, particularly to the post-bubble recovery, followed two consecutive quarters of negative growth. This technical recession is the fourth that has affected the EBRD regions since the mid-1990s, the previous ones were caused by the Asian and Russian economic crises of 1997-1998, the global financial crash of 2008-2009 and the COVID-19 pandemic.
«We call our new report on regional economic prospects «Hold out», – said the chief economist of the EBRD Beata Yavorchik. – Inflation may be declining, but it is still double-digit in more than 3/4 of the countries where we operate. We also see a lot of evidence that households in the EBRD regions are experiencing difficulties when faced with two recessions, one immediately after the other.»
Inflation may begin to decline with a moderate decrease in energy prices, but in March it still averaged 14.3% across the EBRD regions.
Early results of the next stage of the study «Life in Transitional Period», a representative household survey conducted by the EBRD jointly with the World Bank, indicate that 55% of households in the EBRD regions cannot accumulate savings, as they are living from paycheck to paycheck, while 10% of respondents report debt accumulation. Most households have very limited reserves; 59% of households in the EBRD regions state that they cannot cover their basic expenses for more than one month with savings.
Economical advance in Central Asia
The EBRD expects, the economies of Central Asia, including Kazakhstan, the Kyrgyz Republic, Mongolia, Tajikistan, Turkmenistan and Uzbekistan will grow by an average of 5.2% in 2023, according to its latest report on regional economic prospects, published on the days of the bank’s annual meeting in Samarkand.
Ekaterina YARMOLIK, correspondent of magazine «EBU»
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