EBRD Trims Emerging-Market Growth Forecast as War Pressures Mount

The European Bank for Reconstruction and Development has lowered its growth projection for the 41 economies it covers for a second time in a row, pointing to war, costly energy and tighter financing as the main drags.

Growth across the region is now expected to reach 2.5% this year, 0.6 percentage points below the bank's June estimate. The revision reflects what its chief economist, Beata Javorcik, described as a build-up of pressure on several fronts, from diesel and wheat prices to the cost of borrowing.

Iraq recorded the steepest downgrade. Its economy is forecast to shrink by 12% this year after the closure of the Strait of Hormuz curtailed oil exports. Lebanon is expected to contract by 5%, with conflict with Israel weighing on activity.

Ukraine's outlook was also marked down because of intensifying Russian attacks, while Turkey's forecast was reduced as persistent inflation forces tighter financing conditions.

On prices, the picture was less severe than the bank had anticipated. Average inflation across the region steadied at about 6%, with energy accounting for roughly a quarter of that figure.

Wheat remains a concern. Global prices have climbed about 30% since February as attacks in the Black Sea pushed Ukrainian exports to their lowest level since April 2022. Javorcik said the disruption could reduce Ukrainian shipments of wheat, seed oil and metals by $5.5 billion this year, equal to 2.5% of GDP, as low water levels on the Danube and strikes on rail links constrain alternative routes.

She warned that the export losses could affect Ukrainian farmers' ability to buy fertiliser for the next planting season. Costlier wheat also poses a risk to food-importing countries, particularly those such as Egypt that subsidise bread and grain heavily. Russia and Ukraine together supply roughly a quarter of the world's wheat exports.