Growth is slowing across a range of emerging market nations, with economies in Iraq, Lebanon and Ukraine hamstrung by the effects of war, the European Bank for Reconstruction and Development said on Thursday.
High energy prices, rising borrowing costs and issues ranging from drought in Europe to the ongoing closure of the Strait of Hormuz are combining to depress economic growth, the EBRD regional economic outlook found.
Across the 41 economies it covers, the EBRD expects growth of 2.5% this year, 0.6 percentage points below its June forecast and its second consecutive downgrade.
"What's a cause for concern is that there are multiple pressure points, from diesel to cost of wheat to cost of borrowing," EBRD chief economist Beata Javorcik said, according to Reuters. "Pressures are building up, and there are considerable downside risks to our forecast."
The sharpest downgrades were for Iraq and Lebanon. The EBRD expects Iraq's economy to contract by 12% this year after the closure of the Strait of Hormuz curbed oil exports, while Lebanon is expected to contract 5% as conflict with Israel weighs on economic activity.
The EBRD also lowered its forecasts for Ukraine, owing to intensifying Russian attacks, and for Türkiye, where it said persistent inflation pressures were forcing tighter financing conditions.
Price pressures, meanwhile, were less intense than the EBRD had feared. Average inflation in EBRD regions stabilized at around 6%, the report found, and energy accounted for roughly a quarter of the headline figure.
But wheat prices globally are up roughly 30% since February as Black Sea attacks cut Ukrainian exports to the lowest level since April 2022, Javorcik said.
This could cut Ukrainian wheat, seed oil and metals exports by $5.5 billion this year, equivalent to 2.5% of GDP, as low water levels on the Danube and Russian attacks on rail links limit alternative export routes.
"This of course has big implications for economic activity in Ukraine," Javorcik said, adding that, if farmers cannot export their crops, it could harm their ability to buy fertilizer for the next planting season.
Elevated wheat prices threaten food-importing economies, particularly countries such as Egypt that heavily subsidize bread and grain products.
Russia and Ukraine combined account for roughly a quarter of global wheat exports.
