Hike in Energy prices, European bank cuts economic forecasts for 2023

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.