However, across the region as a whole, although economic activity is improving, growth is below pre-pandemic levels.
Economic growth in emerging markets and developing economies (EMDEs) in the Europe and Central Asia region has been revised upwards to 2.4 percent for 2023, according to the World Bank report. Economic update for the regionreleased this week.
The resumption of growth reflects better forecasts for war-affected Ukraine and Central Asia, as well as consumer resilience in Turkey and better-than-expected growth in Russia due to an increase in government spending in military and social transfers.
The forecasts largely mirror those of the European Bank for Reconstruction and Development (EBRD), last published, which showed that growth in Central Asia is outpacing that of emerging Europe.
Excluding Russia and Ukraine, regional production is expected to grow by 3% in 2023. However, growth remains weak compared to long-term averages before the pandemic. Overall, growth in half of Europe and Central Asia is expected to be slower or little changed in 2023 compared to 2022.
During the period 2024-2025, growth is expected to reach 2.6% per year, against a backdrop of weak expansion of the European Union – the region’s largest trading partner -, high inflation, financial conditions stricter measures and fallout from Russia’s invasion of Ukraine.
A new approach to old risks
“Shocks from Russia’s invasion of Ukraine, the cost of living crisis and climate risks are creating formidable challenges in Europe and Central Asia,” says Antonella Bassani, Vice President of the Bank worldwide for the Europe and Central Asia region.
“A new approach will be needed for countries to revive productivity growth, achieve better economic and social outcomes, improve resilience and accelerate efforts to decarbonize the economy. »
Downside risks nevertheless cloud the outlook for emerging countries in Europe and Central Asia.
High inflation could persist amid increased volatility in global commodity markets and a surge in energy prices. Global financial markets could become more volatile and more restrictive due to tightening financing conditions. Global growth for 2020-2024 is weaker than in any five-year period since 1990 and could weaken further.
“Budget deficits are broadly unchanged this year, despite governments’ earlier plans to implement fiscal consolidation after large spending increases in recent years due to COVID and the cost of living crisis” , adds Ivailo Izvorski, World Bank chief economist for the cost of living crisis. Europe and Central Asia region.
“The growing cost of an aging population, rising interest payments, investments needed for climate change mitigation and adaptation, as well as dealing with other overlapping crises, will keep pressure on government budgets. »
Central Asia shines
Ukraine’s economy is expected to grow 3.5% this year after contracting 29.1% in 2022, the year of Russia’s invasion of the country, thanks to more stable electricity supplies, increased public spending, continued donor support, a better harvest and the rerouting of some exports across the country’s western borders.
In Central Asia, growth is expected to strengthen to 4.8 percent this year, and is expected to average 4.7 percent in 2024 and 2025, assuming inflation moderates.
In contrast, in the Western Balkans, growth is expected to slow to 2.5 percent this year, with a projected recovery to 3.3 percent in 2024 and 2025, reflecting moderating inflationary pressures, a gradual recovery in exports and a increased public spending on donor-supported infrastructure projects.
In 2023, consumption remained resilient in Albania, Kosovo and Montenegro, supported by the recovery of tourism, but weakened in Bosnia and Herzegovina, North Macedonia and Serbia due to export demand weakest in the EU.
Intensified trade and increased flows of money and people continued to support economic activity in some economies, notably in Central Asia and the South Caucasus.
Armenia (6.6 percent), Georgia (5.9 percent) and Tajikistan (6.5 percent) remain the fastest growing countries in the region for the second year in a row.
Unlike many news and information platforms, Emerging Europe is free to read and always will be. There is no paywall here. We are independent and do not affiliate with or represent any political party or commercial organization. We want the best for emerging Europe, no more, no less. Your support will help us continue to raise awareness of this magnificent region.
You can contribute here. THANKS.
