November 1, 2018 / 11:01 AM / 15 days ago

Development bank EBRD slashes Turkey growth forecasts

    * EBRD slashes Turkey forecast for 2019
    * Rest of region largely unscathed, though risks piling up
    * Escalation of trade war into Europe would be highly damaging
    * 

    By Marc Jones
    LONDON, Nov 1 (Reuters) - The European Bank for Reconstruction and
Development (EBRD) slashed growth forecasts on Thursday for Turkey, its biggest
lending market, but left the rest of its region largely unscathed despite
growing pressures.
    The development bank still expects all 38 of the economies where it works to
grow this year and next, but cutting Turkey's forecast a combined 4 percentage
points, along with a possible brief recession there, will lower the region's
overall growth rate by 0.6 percent points to 2.6 percent next year.
    It comes after turmoil in Turkey, where the lira has lost roughly a third of
its value and forced the country's central bank to nearly double domestic
interest rates to fend off a full-blown currency crisis.
    "We have downgraded our Turkey forecasts to 1 percent (for 2019) and that of
course has a major impact on our overall forecast for the whole region," Sergei
Guriev, EBRD's chief economist, told Reuters.
    Turkey has seen tentative signs of stabilisation in recent weeks, Guriev
said, the year ahead was still going to be "very difficult". Growth is set to
nosedive and the hike in interest rates will make it far more expensive for
companies to refinance any loans that are coming due.
    Elsewhere, the picture was more stable. Excluding Turkey, growth for the
EBRD's region of operation, which stretches from Morocco to Mongolia, is
forecast to stay around 3 percent. Direct spillovers from Turkey's troubles are
expected to be limited.
    Economies including Poland, Hungary, Armenia, Mongolia and Turkmenistan all
received forecast upgrades for 2018 and 2019. Russia is expected to grow 1.5
percent in both years. Romania, Jordan and the Kyrgyz Republic all saw small or
medium-sized reductions for both years.  
    The EBRD also echoed the International Monetary Fund's recent warning of a
growing set of pressures. 
    "Escalation of trade conflicts is a major risk to the outlook," it said. 
"Other risks include disruption to cross-border supply chains in the case of a
no-deal Brexit, high levels of corporate indebtedness and geopolitical
instability."
    An escalation in the trade war between the United States and China that
slowed the global economy could cut "several decimal points" of growth from the
EBRD's region, Guriev said. If big European economies like Germany get dragged
into the feud, it would be significantly worse.
    "The good news for our countries is that they are part of European value
chains ... and there is no foreseeable risk of a trade war within Europe or
against Europe," he said. "But if for some reason Europe's trading partners
introduce tariffs against Europe, or even west Europe, our countries will be
very badly hit."
    A no-deal Brexit, where Britain exits the European Union without a
replacement trade deal, would hit southeastern European countries hardest, the
report said.
    Unless other member states increased their contributions to the EU, Brexit
would lead to a 10 to 15 percent decline in structural and accession funds
available to countries in central and southeastern Europe. That would amount to
a reduction of up to 0.4 percentage points of GDP in EU-supported investment.
    Slovakian and Hungarian exports to the UK add an estimated 1.5 to 3 percent
to their gross domestic product, mainly in the automotive and machinery sectors.
Poland and Lithuania also have sizable exports of food products, worth 1 to 2
percent of their GDP.
    "An additional impact may arise due to disruption in value chains that link
the EBRD regions’ economies with advanced economies in Europe, which are in turn
linked to the UK," the report said.        
            
         
                      Actual             New      forecast     Difference  
                                                               from May    
                                                               forecasts   
                                                                           
                                                                           
                2016  2017   H1 2018     2018       2019          2018       2019
                                                                               
 EBRD regions   1.9   3.8    3.8          3.2       2.6           -0.1       -0.6
                                                                               
 Central        3.0   4.4    4.7          4.3       3.5           0.5        0.2
 Europe and                                                                
 the Baltic                                                                
 states                                                                    
 Croatia        3.5   2.9    2.7          2.7       2.5           0.0        0.0
 Estonia        3.5   4.9    3.5          3.6       3.0           -0.2       0.0
 Hungary        2.3   4.1    4.7          4.3       3.3           0.5        0.3
 Latvia         2.1   4.5    4.7          3.9       3.5           0.4        0.0
 Lithuania      2.4   4.1    3.8          3.4       2.8           0.2        0.0
 Poland         3.1   4.8    5.1          4.7       3.6           0.7        0.3
 Slovak         3.1   3.2    3.9          3.9       4.0           0.0        -0.2
 Republic                                                                  
 Slovenia       3.1   4.9    4.2          4.2       3.3           0.2        0.0
                                                                               
 South-eastern  3.1   4.4    3.5          3.5       3.2           -0.1       -0.3
 Europe                                                                    
 Albania        3.4   3.8    4.4          4.0       3.9           0.2        0.0
 Bosnia and     3.1   3.0    2.9          3.0       3.5           -0.3       0.0
 Herzegovina                                                               
 Bulgaria       3.9   3.8    3.4          3.6       3.4           0.0        0.0
 Cyprus         4.8   4.2    3.9          3.9       3.5           0.7        0.5
 FYR Macedonia  2.9   0.0    1.6          2.0       3.0           -0.5       0.0
 Greece         -0.2  1.5    2.2          2.2       2.3           0.0        0.0
 Kosovo         4.1   3.7    4.2          4.0       4.0           0.3        0.0
 Montenegro     2.9   4.7    4.8          4.2       3.0           0.9        0.3
 Romania        4.8   7.3    4.0          4.2       3.6           -0.4       -0.6
 Serbia         2.8   1.9    4.9          4.2       3.5           1.3        0.0
                                                                               
 Eastern        0.1   2.3    3.6          3.1       3.2           0.1        -0.1
 Europe and                                                                
 the Caucasus                                                              
 Armenia        0.2   7.5    8.3          5.5       5.0           2.0        0.5
 Azerbaijan     -3.1  0.1    1.3          1.5       3.5           -1.0       0.0
 Belarus        -2.5  2.4    4.6          3.0       2.5           0.0        -0.5
 Georgia        2.8   5.0    5.4          4.5       4.5           0.0        0.0
 Moldova        4.3   4.5    4.5          4.0       4.0           0.5        0.0
 Ukraine        2.4   2.5    3.5          3.5       3.0           0.5        0.0
                                                                               
 Turkey         3.2   7.4    6.2          3.6       1.0           -0.8       -3.2
                                                                               
 Russia         -0.2  1.5    1.6          1.5       1.5           0.0        0.0
                                                                               
 Central Asia   3.6   4.8    4.6          4.6       4.2           0.2        -0.3
 Kazakhstan     1.1   4.1    4.1          4.0       3.5           0.1        -0.3
 Kyrgyz         3.8   4.6    0.1          2.7       3.2           -1.0       -0.8
 Republic                                                                  
 Mongolia       1.2   5.1    6.3          6.1       6.0           0.9        0.1
 Tajikistan     6.9   7.1    7.2          6.1       5.0           1.1        -0.5
 Turkmenistan   6.2   6.5    6.2          6.2       5.6           1.2        0.6
 Uzbekistan     7.8   5.3    4.9          5.0       4.5           -0.1       -0.8
                                                                               
 Southern and   3.3   3.8    4.5          4.4       4.7           0.0        -0.1
 eastern                                                                   
 Mediterranean                                                             
 Egypt          4.3   4.2    5.6          5.3       5.5           0.0        0.0
 Jordan         2.0   2.0    2.0          2.2       2.4           -0.3       -0.3
 Lebanon        1.0   1.5    1.1          1.1       1.5           -0.9       -1.0
 Morocco        1.2   4.0    2.8          3.0       3.5           0.0        -0.5
 Tunisia        1.0   1.9    2.7          2.8       3.0           0.1        0.0
                                                                               
                                                                               
 EBRD regions   1.7   3.1    3.3          3.1       3.0           0.1        0.0
 excluding                                                                 
 Turkey                                                                    
                                                                               
 1 Weighted averages, based on the countries' nominal GDP values in PPP US dollars.
 2 EBRD figures and forecasts for Egypt's real GDP reflect the country's fiscal
 year (July to June). The figure for Lebanon in H1 2018 is an unofficial estimate. 
 
    
 (Reporting by Marc Jones, edited by Larry King)
  
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below