Home Tourism Economic growth in EBRD eastern regions outpaces emerging Europe

Economic growth in EBRD eastern regions outpaces emerging Europe

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  • Growth in EBRD regions in 2023 revised to 2.4 percent

  • Growth in 2024 expected to reach 3.2 percent

  • Inflation down to an average of 9.7 percent in July 2023

The economies of Central Asia, the Caucasus and Türkiye are expected to maintain strong growth in 2023, offsetting weaker performance in emerging Europe, according to the latest report from the European Bank for Reconstruction and Development (EBRD). Regional Economic Outlook report.

In Central Asia and parts of the Caucasus region, the better economic performance is expected to come from solid trade growth and high levels of remittances from Russia. In emerging Europe, the deceleration reflects high energy prices, persistent inflation (averaging 9.7% in EBRD regions as of July 2023) and slow growth in Europe’s advanced economies.

EBRD overall forecast for regions

Growth in EBRD regions is expected to slow to 2.4 percent in 2023, from 3.3 percent in 2022. In 2024, as inflation continues to slow, growth is expected to accelerate to 3. 2 percent. The figures reflect an upward revision of 0.2 percentage points to the May forecast for 2023 and a downward revision of 0.2 percent to the forecast for the following year.

Beata Javorcik, Chief Economist at the EBRD, said: “Our economists are seeing divergent growth patterns across EBRD regions. The robust growth of Central Asian economies and the weaker performance of those of Central Europe and the Baltic States reflect the different consequences of energy prices, inflation and changing trade structures.

Important developments

A number of trends are influencing the latest economic forecasts.

Gas consumption in emerging Europe fell by more than 20% during the winter of 2022-2023, as reduced gas supply from Russia led to higher energy prices . Oil and gas prices, although back below pre-war levels Ukrainecontinue to weigh on growth in the region.

European industry has shifted away from gas-intensive sectors, such as construction materials, chemicals, base metals and paper, while increasing production in less carbon-intensive sectors, such as electrical equipment, automobile manufacturing and pharmaceuticals.

In PolandFor example, production of base metals decreased by 18 percent year-on-year, while production of electrical equipment increased by 21 percent year-on-year.

Overall, total industrial production in Europe was lower than expected, contributing to a slowdown in economic growth. Nevertheless, the labor market remained resilient, with companies retaining jobs despite significant changes in the structure of production. And, amid high inflation, nominal wages have risen rapidly in many economies. In some cases, such as the Baltic countries and Hungarywage increases have outpaced productivity growth, thereby reducing competitiveness.

In contrast, growth in the economies of Central Asia and some Caucasus countries remained strong year-on-year in 2022 and the first half of 2023. This is explained by intermediary trade to and from Russia, as well as by high levels of migration to and from Russia. subsequent remittances from Russia, which supported strong real wage growth.

Regional projections

In central Europe and the Baltic countrieswhere high food and energy costs have strained household budgets and small and medium-sized businesses’ access to finance to invest has been reduced, growth is expected to average 0.5 percent in 2023, compared to 3.9 percent in 2022, and increase to 2.5 percent in 2024.

A weaker external environment and the impact of inflation on EBRD economies in the South Eastern European Union is expected to lead to growth of 2 percent in 2023 and a recovery to 2.8 percent in 2024.

In the Western Balkans, the effect of weakening trade with eurozone partners in early 2023 was partly offset by the strong performance of the tourism sector in the region’s service-based economies. Gross domestic product (GDP) is expected to grow by 2 percent in 2023 and reach 3.4 percent in 2024.

Become slim Central Asia is expected to remain robust, at 5.7 percent in 2023 and 5.9 percent in 2024. Driving factors include government spending, demand for raw materials from China, intermediated trade with and exports to Russia, as well as as remittances and business relocation from Russia.

In Eastern Europe and Caucasus, economies have adapted to the extreme shock caused by the war in Ukraine. Forecasts predict GDP growth of 1.9 percent in 2023 and an increase to 3.1 percent in 2024.

In Ukraine, GDP growth of 1 percent is expected for 2023, reflecting a sharp year-on-year contraction in the first quarter. This is expected to be followed by a 3 percent increase in 2024.

Become thin Türkiye Growth is expected to be 3.5 percent in 2023 and 3 percent in 2024. The upward revision of one percentage point from the previous forecast reflects pre-election fiscal stimulus, although growth should slow down in the second half.

Exit in the southern and eastern Mediterranean region* is expected to grow by 3.7 percent in 2023 and 3.9 percent in 2024, with downward revisions from previous forecasts reflecting delays in structural reforms and increasing fiscal and external vulnerabilities.

* These forecasts do not include the potential effects of the September 2023 earthquake in Moroccobecause the likely impact on overall economic activity remains difficult to assess at this stage.

Source: National authorities and EBRD. Notes: Weights are based on 2022 gross domestic product values ​​at market exchange rates. Where the first half of the year is not yet available, “e” refers to the first quarter figures (and the May 2023 forecast for Lebanon).

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