Market Analysis

The European Bank for Reconstruction and Development (EBRD) has released its semi-annual report, indicating that two wars and elevated borrowing expenses have dampened growth prospects in the regions it covers. Despite this, the EBRD still anticipates a 3% economic growth across approximately 40 countries, slightly lower than the 3.2% predicted earlier. Chief Economist Beata Javorcik mentioned that while this year shows promise, uncertainties loom large due to the repercussions of conflicts in Ukraine and Gaza.

The downward adjustment in growth forecasts is attributed partly to slower growth in central Europe and the Baltic states, influenced by Germany's economic slowdown. Additionally, spillover effects from Gaza and sluggish reform progress in Egypt are impeding economic expansion in southern and eastern Mediterranean countries. This has led to a revised growth projection of 3.4% in 2024 and 3.9% in 2025 for these regions.

The report also highlights geopolitical shifts affecting investment patterns, notably with China's increasing share of foreign direct investment into EBRD regions, particularly benefiting Egypt, Morocco, and Serbia.

While there are some bright spots, such as Poland and Croatia, where growth is expected to pick up, high borrowing costs present a challenge. Furthermore, the aftermath of the Ukraine conflict is pressuring budgets as countries ramp up defense spending, eroding the once-prominent peace dividend.

In summary, while there are pockets of growth, various geopolitical and economic challenges are tempering overall growth expectations across the EBRD regions.

Paraphrasing text from "Reuters" all rights reserved by the original author.