The European Bank for Reconstruction and Development estimated that the Russian economy will contract less than expected this year, but the Turkish economy will suffer more than expected from the February 6 earthquake.
In general, the economies of the countries in which the European Bank for Reconstruction and Development is present are expected to grow by 2.2%, according to updated data from the institution, which previously expected a growth of 2.3%.
The European Bank for Reconstruction and Development indicated that inflation began to decline after the rise in energy prices in the wake of the Russian invasion of Ukraine, but it still averaged 14.3% in its areas of activity in March.
Turkey is expected to grow by 2.5% in 2023, after recording a growth of 5.6% in 2022, mainly driven by an “unconventional” monetary policy that includes interest cuts, despite inflation rising to 85% in one year in October before That recently dropped to 50%.
The expected growth rate declined by half a percentage point compared to the previous forecast in February due to the impact of the devastating earthquake.
The earthquake damage exceeds $100 billion, according to the bank’s estimates, which believes that reconstruction efforts will drive growth in 2024, reaching 3%.
“In recent years, Turkey has prioritized growth over macroeconomic stability. There is a limit to how long (…) the basic laws of the economy can be ignored,” said Beata Yavorczyk, chief economist at the European Bank for Reconstruction and Development.
She added that as Turkey heads towards a second round of its presidential elections, “no matter who wins, tough choices await the next government.”
As for Ukraine, the economy is expected to grow by 1% this year, after an unprecedented collapse in GDP by 29% in 2022 with the start of the Russian invasion.
“Producers have to deal with frequent power outages, damage to their facilities and infrastructure, logistical difficulties, labor shortages, and occasional airstrikes,” the report said.
Nevertheless, Ukraine’s macroeconomic stability has been maintained through the long-term financing and IMF program.
The European Bank for Reconstruction and Development expects Ukraine to grow by 3% next year, despite strong doubts about the course of the conflict.
In Russia, the economy contracted by 2.1% last year, less than expected, and is expected to contract again by 1.5% this year, according to updated forecasts.
Russia benefited from higher than expected oil revenues thanks to the redirection of its exports to other countries to compensate for its decline in Eastern Europe. Russia’s economic growth is expected to return to 1% next year.