EBRD Predicts Iraq Economy to Shrink 12% Due to Hormuz Closure

The European Bank for Reconstruction and Development (EBRD) is forecasting a significant economic downturn in Iraq, expecting its economy to contract by 12% this year. This drastic prediction is attributed to the closure of the Strait of Hormuz, which has severely disrupted oil exports.

This is not an isolated case; several other economies are also experiencing a decline due to various factors such as wars, higher energy prices, and rising borrowing costs. The EBRD's Regional Economic Prospects report highlights these concerns, with Lebanon expected to contract by 5% this year due to the ongoing conflict with Israel.

The bank has lowered its forecast for Ukraine as Russian attacks intensify and for Turkiye, where inflationary pressures and tighter financing conditions continue to weigh on the economy. The overall growth forecast across the 41 economies covered in the report is now at 2.5%, a 0.6 percentage point downgrade from June.

Average inflation across the EBRD's regions of operation remains high, with energy accounting for nearly a quarter of the rate. Global wheat prices have risen significantly, and Ukraine's exports are being severely impacted due to Russian attacks on railway lines and lower water levels in the Danube River.