Istanbul, May 18 (HNA) – The European Bank for Reconstruction and Development (EBRD) expects output in its regions to grow by 3.0 percent in 2024, up from 2.5 percent in 2023, despite challenges stemming from global geopolitical tensions, including growing limitations on trade, according to its latest Regional Economic Prospects report.
Growth in the Bank’s regions is projected to pick up further in 2025, to 3.6 percent.
The new report, titled “Taming inflation”, brings encouraging news of a gradual easing of inflationary pressures compared to the previous year. This trend, marked by an economic slowdown due to high energy prices resulting from the war in Ukraine and post-Covid recovery, is a positive sign for the economic stability in the EBRD regions.
While growth is expected to accelerate, the forecast is slightly below last September’s projections, with a downward revision of 0.2 percentage points. This adjustment is primarily due to slower-than-expected growth in early 2024 across central Europe and the Baltic states, echoing Germany’s sluggish economic performance. Additionally, southern and eastern Mediterranean economies are grappling with weak growth due to the spillovers from the war in Gaza and reduced fiscal stimulus in Egypt. Central Asia’s growth contributions from intermediated trade are also levelling off, indicating a more modest growth outlook in the future.
As energy and food prices have moderated since 2022, inflation in the EBRD regions fell to an average of 6.3 percent in March 2024, a peak of 17.5 percent in October 2022. While this drop was quicker than expected a year ago, inflation remains two percentage points above pre-pandemic levels. This pattern mirrors trends in advanced economies, where inflation has declined but remains above central banks’ targets. The forecast notes slower disinflation in EBRD countries with larger budget deficits and weaker macroeconomic frameworks.
“While disinflation has been faster than expected, inflation in some of our countries remains high,” said Beata Javorcik, the EBRD’s Chief Economist.
“The outlook is subject to significant risks, particularly from the escalation of geopolitical tensions and its unwanted economic effects. While the current shifts in trade and investment relationships may benefit some individual economies, let’s not forget that globally, geopolitical fragmentation leads to inefficiencies and higher volatility.”