European bank cuts GDP growth forecast for 2024

By Tuba Ongun

The European Bank for Reconstruction and Development (EBRD) on Wednesday lowered its growth forecast for 2024 in its regions – emerging Europe, Central Asia, and North Africa – amid geopolitical tensions.

The gross domestic product (GDP) of the EBRD regions, which cover nearly 40 economies, is projected to grow 3% this year, down 0.2 percentage points from its September forecast, the bank said in a report.

This downward revision was partly due to slower-than-expected growth in early 2024 across central Europe and the Baltic states, echoing Germany’s sluggish economic performance, it noted.

"Economic activity in the southern and eastern Mediterranean is expected to be weaker than previously projected because of spillovers from the war in Gaza and structural challenges and slow reform progress in Egypt while intermediated trade in Central Asia appears to have leveled off and is expected to make a more modest contribution to growth than in the past two years," it said.

Economic growth in the EBRD region is foreseen to accelerate further next year to 3.6%.

Beata Javorcik, the EBRD’s chief economist, warned that the escalation of geopolitical tensions and its economic fallout pose a risk to the outlook.

"While the current shifts in trade and investment relationships may benefit some individual economies, let’s not forget that globally, geopolitical fragmentation leads to inefficiencies and higher volatility,” Javorcik noted.

Since February 2022, arms trade as a share of imports and exports of the EU economies in the EBRD regions rose from 0.1% to 0.3-0.5%, the bank added.

In central Europe and the Baltic states, GDP growth is expected to come in at 2.2% this year and 3.1% next year

In the EBRD countries in the southeastern EU, the growth is projected at 2.8% in 2024, supported by accommodative fiscal stances and robust real wage growth.

The Western Balkans region is expected to grow 3.3% in 2024 versus 2.5% in 2023.

The bank expects Central Asia's GDP to rise by 5.4% in 2024 and by 5.9% next year.

Growth in the Caucasus is forecast to be moderate at 4.1% in 2024 before settling closer to 3.5% in 2025, a level in line with estimates of medium-term potential growth.

Ukraine’s output growth is foreseen to be held back this year due to significant recent damage to electricity infrastructure.

Türkiye's GDP growth is projected to slow from 4.5% in 2023 to 2.7% in 2024, followed by a slight uptick to 3.0% in 2025.

"The latter outlook reflects expectations of stricter monetary and fiscal policies in the face of persistently high inflation," it said.

In the southern and eastern Mediterranean region, revised growth forecasts foresee an acceleration from 2.6% in 2023 to 3.4% in 2024, the report noted.