(ANSA-AFP) - LONDON, SEP 28 - Rocketing inflation and
dwindling gas supplies fuelled by Russia's invasion of Ukraine
will hammer growth in the ex-Soviet bloc next year, Europe's
development bank forecast Wednesday. The European Bank for
Reconstruction and Development cut its 2023 growth guidance,
with Ukraine facing a much weaker rebound than expected. The
bank's investment zone is set for growth of three percent next
year. But the EBRD had previously forecast a stronger expansion
of 4.7 percent for its region that includes nations ranging from
Albania to Poland and Morocco. Founded in 1991 to help former
Soviet bloc countries switch to free-market economies, the EBRD
has since extended its reach to include nations in the Middle
East and North Africa. "Negative factors related to high energy
prices, the Ukraine war, inflation and the anticipated slowdown
in western Europe, make the prospects for next year bleaker,"
chief economist Beata Javorcik told AFP in an interview. The
zone is nevertheless expected to expand by 2.3 percent in 2022,
upgraded from 1.1 percent on a "temporary" boost from strong
post-pandemic consumer spending. Yet the bank remains mindful
that many EBRD nations are "highly" dependent on gas for their
energy needs. "These are very worrying times for the EBRD
regions and many advanced economies," added Javorcik. "As we
head towards winter, the economic cost of Russia's war against
Ukraine is growing clearer with every day that passes." Global
inflation has surged this year, largely on runaway oil, gas and
food prices after Russia launched its assault on neighbouring
Ukraine in February. Inflation for the EBRD's zone hit 16.5
percent in July, the highest level since 1998. "Inflation may
not have peaked in the EBRD regions as in many countries the
increase in producer costs and high natural gas prices have not
yet been fully reflected in consumer prices," noted Javorcik.
The EBRD expects Ukraine's economy to contract 30 percent this
year, unchanged from its prior estimate, before growing by eight
percent in 2023. The bank had in May forecast a much stronger
25-percent rebound for next year. The London-headquartered bank
explained that it had expected Ukraine reconstruction work to be
under way. - Russia sanctions to bite - The EBRD added that
Russia's sanctions-hit economy would shrink three percent next
year, downgraded from zero growth, after contraction of an
upwardly revised five percent in 2022. "In general we believe
that sanctions will bite going forward," added Javorcik. The
lender stressed that its projections were subject to "major
downside risk" should the Ukraine war escalate -- or Russia
slash gas exports further. If Moscow cuts off all supplies of
gas to Europe, then EBRD nations will also encounter major
supply-chain problems. "The effects of the war are becoming
visible in the (EBRD) economies," said Javorcik. "We are seeing
much higher energy prices, increased inflation, and the expected
slowdown in western Europe is going to hit exports quite hard."
Analysts are increasingly predicting a global recession for 2023
as central banks ramp up interest rates to cool decades-high
inflation. (ANSA-AFP).
© Copyright ANSA - All rights reserved