Turkey’s earthquake-hit economy will grow this year by less than previously forecast, while Russian output will shrink far less than expected despite Ukraine war sanctions, Agence France-Presse reported, citing Europe’s development bank on Tuesday.
The European Bank for Reconstruction and Development, which later opens its annual meeting in Uzbekistan, published its latest outlook for a region hit also by rampant inflation and slowing global economic activity.
The EBRD predicted Turkish GDP will expand 2.5 percent this year, cutting prior guidance of 3.0 percent and citing the impact of “unorthodox” loose monetary policy alongside one of the world’s highest inflation rates, as well as February’s deadly earthquakes.
The death toll of Turkey’s worst disaster of modern times stands at more than 50,000. Official estimates put the damage inflicted by the February earthquakes at more than $100 billion, the EBRD said.
Turkey, meanwhile, faces a presidential runoff later this month after President Recep Tayyip Erdoğan on Monday came within a fraction of a percentage point of defeating secular challenger Kemal Kılıçdaroğlu in the first round, despite the country’s most dire economic crisis since the 1990s.
“Over the last several years, Turkey has been prioritizing growth over macroeconomic stability,” EBRD chief economist Beata Javorcik told AFP.
“There is a limit to how long one can engage in unconventional policies and defy the basic laws of economics.
“So, no matter who wins there are some difficult choices awaiting the new Turkish government.”
Turning to Russia, the EBRD forecast Tuesday that its economy will shrink 1.5 percent, compared with a previous estimate of a 3.0 percent contraction.
The upgrade for the key energy producer was driven by higher oil price expectations and as Western sanctions force it to sell elsewhere.
The institution added that the economies of its operating zone would grow by a 2.2 percent overall this year.
However, that marked a downgrade from a February forecast that was recalculated at 2.3 percent using latest data.
The EBRD also noted that its region’s inflation remained stubbornly high at 14.3 percent in March, after spiking last year on soaring energy prices after the start of the Ukraine conflict.
2023 is “a very difficult year for Central Europe and Baltics, as inflation is eroding the purchasing power of consumers,” Javorcik added.
“Now this contrasts very much with Central Asia and the Caucuses. These countries … have benefited from influx of Russian who were escaping the war.”
Nations in this region also played a key role in “intermediating trade, particularly between Western Europe and Russia,” she noted.
This trade was “particularly pronounced in goods that are fully or partially subject to sanctions.”
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 to cover a total of 29 nations.