European bank cuts economic forecasts for 2023 over rising energy bills

By Tuba Sahin

ANKARA (AA) - The European Bank for Reconstruction and Development (EBRD) on Wednesday cut its 2023 growth forecasts for economies where it invests due to the energy crisis led by the Russia-Ukraine war and mounting inflationary pressures.

The bank projected the gross domestic product in its regions – emerging Europe, Central Asia and North Africa – to grow 3% in 2023, a downward revision of 1.7 percentage points compared to its previous forecast, amid surging energy prices.

Average inflation in the EBRD regions, which covers some 40 economies, reached 16.5% in July 2022, a level last seen in 1998, it said, underlying that wheat prices have largely returned to their pre-war levels but oil prices remain high by historical standards.

However, the EBRD raised its forecasts for this year by 1.2 percentage points to 2.3% led by better-than-expected outturns in the first half of 2022.

Revised up by 2.5 points, Türkiye's economy is expected to grow 4.5% this year on the back of a more-robust-than-expected domestic demand and a modest recovery in exports.

The growth forecast for the Turkish economy next year is unchanged at 3.5%, the bank said.

The war is estimated to cause the Ukrainian economy to shrink by nearly a third (30%) this year, unchanged from its previous forecast in May. For 2023, the bank has lowered its forecast of an economic rebound to 8% from 25%, driven by uncertainty over the shape of Ukraine's future.