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Qatar Tribune
13-05-2025
- Business
- Qatar Tribune
EBRD slashes growth forecast again on tariffs, uncertainty
Agencies Tariffs, conflicts and economic concerns in major economies like Germany and China have prompted the European Bank for Reconstruction and Development (EBRD) to lower its economic growth forecasts for the fourth consecutive time, the lender announced on Tuesday. In its latest report, which covers economies in emerging Europe, central Asia, the Middle East and Africa, the EBRD lowered its previous forecast for 2025 made in February by 0.2 percentage points to 3%, with downward revisions across most economies. 'The revision is a result of increased global policy uncertainty, weaker external demand and the direct and indirect effects of announced increases in import tariffs,' the London-based bank said. It sees a modest recovery to 3.4% in 2026. 'Almost no country remains untouched by what's happening in the world,' EBRD Chief Economist Beata Javorcik said. 'The biggest effect on our countries is indirect via changes in prospects for Germany and China.' Slovakia and Hungary will suffer the largest direct hit from U.S. tariff increases, with 2025 growth forecasts revised down by 0.5 percentage points, to 1.4% and 1.5%, respectively. Both countries are heavily geared toward the automotive industry. The report was compiled before the latest news on the U.S. and China reaching a deal to temporarily slash tariffs. 'Firms are halting investments and waiting to see what will happen,' Javorcik said. 'We have this very big shift of mindset from resilience of global value chains in terms of security of supply ... now, security of market access is the key concern.' The United States in April imposed a 10% 'baseline' tariff on nearly all its trading partners, along with sector-specific levies of 25% on cars, steel and aluminium. These are expected to have 'significant global repercussions, including for the EBRD regions,' the bank said. The analysis indicates that the average effective U.S. tariff on imports from the bank's regions is estimated to surge from 1.8% in 2024 to 10.5%, assuming unchanged composition of exports, it added. Projects underway are already being slowed down and delayed, even as the U.S. paused blanket new 'reciprocal' tariffs and said it was ready to negotiate on other levies it imposed as part of U.S. President Donald Trump's aim to convince firms to bring manufacturing back to the United States. But the economic hits to Germany, China and other large European countries are looming; Germany is the largest trading partner for 10 EBRD economies, with exports to it accounting for nearly a quarter of gross domestic product (GDP) in the Czechia, and close to 20% in Slovakia, Hungary and North Macedonia. While Germany saw a slight rebound in growth at the start of 2025 after two years of recession, the outlook for Europe's largest economy has been clouded by U.S. tariffs. That adds to problems already felt in its manufacturing sector and as its economy is expected to stagnate this year. While Europe's push to boost defense spending could be a boon for certain countries, including Poland, Türkiye and the Czechia, 'there is a very real concern that the increase in defense spending will crowd out other expenditure.' Meanwhile, while the International Monetary Fund (IMF) expects average debt in EBRD regions to remain broadly stable at 52% of GDP from 2025-2029, Javorcik said that was 'too optimistic given what we are seeing on the ground.' The IMF, Javorcik said, is assuming revenues will be high and that new spending will be matched by cuts elsewhere. 'We think that actually some budget deficits will be higher,' she said. Javorcik said the debt and reliance of many countries on international bond borrowing add an element of risk; already, Egypt is spending 13% of its GDP servicing debt. 'If there is a flight to safety, if investors choose to go to safer havens, that means our countries might be exposed to that shock,' she said. For Ukraine, the EBRD revised its forecast for this year downward by 0.2 percentage points to 3.3%, due to weaker European Union demand and continued damage to energy infrastructure from Russian attacks. In Türkiye, the bank said it expects the economy to grow by 2.8% in 2025, 0.5 percentage points lower than its February 2025 forecast due to lower domestic and external demand and tighter-than-expected monetary policy. It expects the Turkish economy to then grow by 3.5% in 2026, unchanged from previous forecasts. Türkiye's downward revision reflects expectations of tighter domestic financial conditions as heightened uncertainty weighs on domestic demand, as well as weakening external demand due to increased uncertainty around global trade policy, the bank said. 'Downside risks stem from still-high inflation and the impact of tighter-for-longer global financial conditions on Türkiye's substantial short-term external financing needs,' it noted. The report noted recent improvements in the economy's external position, with net exports rising and the current account deficit declining steadily in the 12 months to February this year. However, inflows of foreign direct investment (FDI) remained relatively low at $12.2 billion, it added. The EBRD invested a record 2.6 billion euros ($2.89 billion) in Türkiye in 2024, driven by the private sector's appetite for green investments and the bank's continuing support for regions affected by the devastating February 2023 earthquakes. The bank's cumulative investment in the country stands at over 22 billion euros, with its current portfolio in the country totalling around 8 billion euros. The EBRD was founded in 1991 to help former Soviet bloc nations embrace free-market economies, but has since extended its reach to the Middle East and North Africa.
Asharq Al-Awsat
13-05-2025
- Business
- Asharq Al-Awsat
Türkiye's Recent Political Events Hit Economy, Reserves, Says EBRD
Recent political events in Türkiye stymied the country's path to slowing inflation and the fallout affected the economy as well as foreign exchange reserves, the European Bank for Reconstruction and Development's chief economist said. The detention of Istanbul mayor and main opposition leader Ekrem Imamoglu on March 19 sent the lira sharply lower and triggered market turmoil that pushed the central bank into a surprise interest rate hike in April, short circuiting an easing cycle that began at the start of the year. Türkiye had been on a "slow but steady" path towards reducing inflation before the event, EBRD Chief Economist Beata Javorcik told Reuters. "This path allowed it to cut interest rates, but that process was stopped by the recent political events, which brought turbulence and forced the central bank to reverse the direction," Javorcik said, adding raising interest rates put the brakes on the economy. "This is costly in terms of economic performance, in terms of reserves ... and in terms of the reputational implications, undermining confidence of investors." Türkiye has struggled with very high inflation in recent years, which peaked at 75% last May. The bank downgraded its forecast for Türkiye's economic growth this year by 0.5 percentage points to 2.8%, due to lower domestic and external demand and tighter-than-expected monetary policy. Türkiye's bonds and stock market had become a big draw for global money managers in the months leading up to Imamoglu's detention. The appointment of Finance Minister Mehmet Simsek in 2023, widely seen as the architect of the government's return to a more orthodox economic policy, helped lure investors. The EBRD said Türkiye's central bank sold more than $40 billion in foreign exchange in the weeks following Imamoglu's arrest, pulling net reserves, excluding swaps, from more than $60 billion to less than $20 billion. The latest reserve numbers, published on Monday, showed that Türkiye's gross reserves had risen by $6 billion - the first such gain in nearly two months.
Yahoo
13-05-2025
- Business
- Yahoo
EBRD cuts regional economic outlook as geopolitical tensions linger
The European Bank for Reconstruction and Development (EBRD) slashed its regional economic forecast for this year by 0.2%, compared to its February 2025 outlook, in its latest Regional Economic Prospects report launched on Tuesday. The bank now expects growth in the EBRD regions to be about 3% in 2025, before edging up marginally to 3.4% in 2026. This downbeat forecast is mainly due to the impact of tariff increases and ongoing geopolitical uncertainty on supply chains and trade. Lagging external demand has also had an impact on this outlook. Strong domestic demand, loose fiscal policies and robust nominal wage growth are also boosting inflation in the EBRD regions. Following a drop to 5.3% in September 2024, average inflation rose to 6.1% in February this year. Average debt in the EBRD regions is likely to stay more or less the same, at about 52% of gross domestic product (GDP) over the next four years. This outlook however assumes that governments will announce more stringent fiscal policies, which should also include increased industrial policies, defence and interest payments spending, while some expenditure areas see cuts. Related Are these the best European countries to start a business in? Stocks jump, gold tumbles as US and China trade talks progress US tariffs have the potential to impact global supply chains, especially in key European economies such as Germany. However, trade diversion, especially through countries with relatively lower tariffs could help offset and distribute the impact of higher US tariffs. According to the EBRD, 'the average effective US tariff on imports from the Bank's regions is estimated to surge from 1.8 per cent in 2024 to 10.5 per cent, assuming unchanged composition of exports.' Beata Javorcik, the EBRD's chief economist, said in a press release: 'Although understanding the full macroeconomic effects of the newly announced tariffs will take time, it is already clear that our regions have entered a period of heightened uncertainty and slower growth. 'Reducing trade tensions through constructive dialogue and achieving consensus on trade policy among key stakeholders are crucial, as prolonged uncertainty carries painful economic costs.' The Western Balkans, Baltic states and central Europe are expected to see the largest reductions in growth, according to the EBRD. The Western Balkans' GDP is likely to be 3.2% in 2025, before edging up slightly to 3.4% next year, primarily because of Serbian political turmoil as well as spillover effects from decreased growth in more advanced Western European economies. Serbia, North Macedonia, Bosnia and Herzegovina and Montenegro are likely to be some of the most affected Western Balkans countries this year. Economic growth for central Europe and the Baltic states is likely to be 2.4% this year, and 2.7% in 2026. This is mainly because of the effect of new tariffs and slower external demand, especially from Germany, as well as higher global policy uncertainty. The Slovak Republic, Estonia and Hungary are expected to be the most hit, experiencing the sharpest downward revisions from the EBRD's February 2025 forecasts. Coming to southeastern EU economies, GDP is expected to rise to 2% in 2025, which would be an increase from the 1.6% seen in 2024, but would still be less than earlier forecasts. This rebound is mainly expected to be driven by Bulgarian demand. In 2026, GDP is expected to be 2.4%. This year, Central Asian economic growth is likely to decrease to 5.5%, with a further drop to 5.2% expected for 2026. Declining commodity prices are likely to subdue economic growth for Mongolia and Kazakhstan. Southern and eastern Mediterranean economic growth could be 3.6% this year, before rising slightly to 3.9% in 2026. Turkey's GDP is expected to fall from 3.2% last year to 2.8% this year, mainly because of tighter-than-anticipated monetary policy and slower external and domestic demand. However, economic growth is likely to bounce back to 3.5% in 2026. GDP is likely to be 3.5% in 2025 in eastern Europe and the Caucasus, before surging to 4.3% in 2026, although ongoing damage to Ukrainian energy infrastructure and weaker EU demand is likely to dampen Moldova and Ukraine's outlook.
Reuters
13-05-2025
- Business
- Reuters
Turkey's recent political events hit economy, reserves, says EBRD
LONDON, May 13 (Reuters) - Recent political events in Turkey stymied the country's path to slowing inflation and the fallout affected the economy as well as foreign exchange reserves, the European Bank for Reconstruction and Development's chief economist said. The detention of Istanbul mayor and main opposition leader Ekrem Imamoglu on March 19 sent the lira sharply lower and triggered market turmoil that pushed the central bank into a surprise interest rate hike in April, short circuiting an easing cycle that began at the start of the year. Turkey had been on a "slow but steady" path towards reducing inflation before the event, EBRD Chief Economist Beata Javorcik told Reuters. "This path allowed it to cut interest rates, but that process was stopped by the recent political events, which brought turbulence and forced the central bank to reverse the direction," Javorcik said, adding raising interest rates put the brakes on the economy. "This is costly in terms of economic performance, in terms of reserves ... and in terms of the reputational implications, undermining confidence of investors." Turkey has struggled with very high inflation in recent years, which peaked at 75% last May. The bank downgraded its forecast for Turkey's economic growth this year by 0.5 percentage points to 2.8%, due to lower domestic and external demand and tighter-than-expected monetary policy. Turkey's bonds and stock market had become a big draw for global money managers in the months leading up to Imamoglu's detention. The appointment of Finance Minister Mehmet Simsek in 2023, widely seen as the architect of the government's return to a more orthodox economic policy, helped lure investors. The EBRD said Turkey's central bank sold more than $40 billion in foreign exchange in the weeks following Imamoglu's arrest, pulling net reserves, excluding swaps, from more than $60 billion to less than $20 billion. The latest reserve numbers, published on Monday, showed that Turkey's gross reserves had risen by $6 billion - the first such gain in nearly two months.
France 24
13-05-2025
- Business
- France 24
US tariffs hit Central Europe, Balkans growth: Europe bank
The London-based European Bank for Reconstruction and Development has downgraded its growth forecast for the regions, anticipating tariffs fallout owing to their heavy dependence on Germany's struggling economy. The United States in April imposed a 10 percent "baseline" tariff on nearly all US trading partners, along with sector-specific levies of 25 percent on cars, steel and aluminium. "Recent changes in US trade policy have left very few countries unaffected," Beata Javorcik, chief economist at the EBRD, told AFP. For the identified EBRD regions, "the main effect is operating indirectly via the German market", she added. Overall, the economies of the countries in which the bank operates should grow by 3.0 percent this year, slightly lower than anticipated in February, according to the institution. While Germany saw a slight rebound in growth at the start of 2025 after two years of recession, the outlook for Europe's largest economy has been clouded by US tariffs. That adds to problems already felt in its manufacturing sector and as its economy is expected to stagnate this year. Many Central European and Balkan states rely on exports to Germany to support their economies. Czech exports to Germany account for a quarter of the country's gross domestic product, while for North Macedonia, it is 20 percent, according to Javorcik. The share is also strong for Slovakia and Hungary and to a lesser extent for Poland and Slovenia. The trade war between Washington and Beijing has also dampened growth prospects in the EBRD regions. However, Javorcik expressed optimism following a US-China agreement on Monday to slash tariffs, as well as a US-UK trade agreement last week. It "gives us hope that there will be an agreement reached between the EU and the US, which will improve growth prospects" for the European Union, she said. This in turn would "spill over positively onto our regions of operations". The EBRD was founded in 1991 to help former Soviet bloc nations embrace free-market economies, but has since extended its reach to the Middle East and North Africa. The EBRD's economic updates coincided with the start of its annual conference being held in London until Thursday and expected to approve the bank's strategic and capital framework for the next five years. It is also set to mark the start of the bank's move into sub-Saharan Africa by making Benin, Ivory Coast and Nigeria countries of operation.
