European bank trims economic forecasts for 2023 amid persistent inflation

By Tuba Sahin

ANKARA (AA) - The European Bank for Reconstruction and Development (EBRD) on Thursday cut its growth forecast for 2023 in its regions – emerging Europe, Central Asia, and North Africa – due to high gas prices and persistent inflation.

The gross domestic product (GDP) of the EBRD regions, which covers nearly 40 economies, is expected to rise 3% this year, a downward revision of 0.9 percentage points compared to its September forecast, the bank said in a report.

Growth forecasts were revised downwards in more than half of the EBRD region, with very few upward revisions.

Economic growth is expected to pick up to 3.3% in 2024, in line with estimates of medium-term potential growth.

Average inflation in the EBRD regions dropped to 16.5% in December after peaking at 17.5% in October, pushed up by high energy prices, it said.

"The EBRD’s economies are still suffering from a mix of high gas prices and inflation, with the latter likely to take longer to fall than markets expect," said Beata Javorcik, the EBRD’s chief economist.

The bank expects embattled Ukraine's GDP to rise 1% this year, a stabilization of real output at around 70% of its 2021 level. The war-hit economy is projected to grow 3% in 2024.

The Russian economy, on the other hand, is expected to contract 3% in 2023 due to declining oil prices, ongoing sanctions, and fiscal pressures.

GDP growth in Türkiye, the largest recipient of EBRD funds, was revised down to 3% in 2023, as growing external financing requirements and political uncertainty associated with upcoming elections create significant economic vulnerabilities.

The bank added that its forecasts do not take into account the Feb. 6 earthquakes in Türkiye but that their impact is expected to be limited to 1% of GDP, with the boost from reconstruction efforts later this year likely to partly offset the damage to supply chains and infrastructure.

Over 36,000 people were killed by the two strong earthquakes that jolted southern Türkiye last week, according to the latest figure from the country's disaster agency on Thursday.

The Feb. 6 magnitude 7.7 and 7.6 earthquakes, centered in the Kahramanmaras province, affected more than 13 million people across 11 provinces, including Adana, Adiyaman, Diyarbakir, Gaziantep, Hatay, Kilis, Malatya, Osmaniye, Sanliurfa, and Elazig.