EBRD Trims Growth Outlook Amid War Pressures in Emerging Markets

The European Bank for Reconstruction and Development (EBRD) has cut its growth outlook for emerging market nations, citing multiple pressure points and considerable downside risks. The EBRD expects growth of 2.5% this year, down from its previous forecast of 3.1%, due to factors such as high energy prices, rising borrowing costs, and regional conflicts.

The sharpest downgrades were for Iraq and Lebanon, with the EBRD expecting Iraq's economy to contract by 12% this year after the closure of the Strait of Hormuz curbed oil exports. Lebanon is expected to contract 5%, weighed down by conflict with Israel. The EBRD also lowered its forecasts for Ukraine due to intensifying Russian attacks and for Türkiye, where it said persistent inflation pressures were forcing tighter financing conditions.

The EBRD's regional economic outlook found that wheat prices globally are up roughly 30% since February as Black Sea attacks cut Ukrainian exports to the lowest level since April 2022. This could cut Ukrainian wheat, seed oil, and metals exports by $5.5 billion this year, equivalent to 2.5% of GDP.