Inflation dampens growth in ex-Soviet bloc: EBRD bank

LONDON

Persistent high inflation, fueled by elevated gas prices, will limit growth recovery in the ex-Soviet bloc this year, Europe’s development bank forecast yesterday.

While wholesale gas prices in Europe have largely returned to levels seen before Russia’s invasion of Ukraine 12 months ago, “in real terms, such levels are comparable to the highs of the 1980s,” the European Bank for Reconstruction and Development (EBRD) said in a key report.

Founded in 1991 to help former Soviet bloc countries switch to free-market economies, the EBRD has since extended its investment reach to include nations in the Middle East and North Africa.

Presenting its latest forecasts yesterday, the London-based institution said gross domestic product in the bank’s regions was expected to grow 2.1 percent in 2023, down from an estimate of 3.0 percent made in September.

GDP output across the three continents is estimated to have grown by about 2.4 percent last year, “slower than in 2021 as the war on Ukraine took its toll and the post-COVID recovery has mostly run out of steam.”

BRD chief economist Beata Javorcik said “optimism about the rate of recovery and growth after the crises of recent years, notably the war in Ukraine, is... misplaced.”

“That is why we are calling this end-of-winter update to our forecasts ‘Not out of the woods yet.’”

And she sounded a cautious note on investment with no end yet in sight to the Ukraine conflict.

“At the moment, we do not see a quick resolution of the war,” Javorcik told AFP.

“This lack of clear path to resolving the war means that high level of uncertainty will persist and that is damaging investment.”