EBRD slashes growth forecasts due to eurozone crisis

2011-10-18 16:43:16

The European Bank for Reconstruction and Development on Tuesday cut its forecast for its operating region in the former Soviet bloc, and blamed the impact of Europe's sovereign debt problems.

"The EBRD is predicting a slow-down in emerging Europe's economic growth next year with the continuing eurozone sovereign debt crisis posing challenges to recovery from the 2008/09 global financial crisis," it said in a statement.

"Increased stress in the eurozone could have an even more severe impact on emerging Europe this time around."

The London-based EBRD has lowered its 2011 gross domestic product (GDP) growth forecast for its zone of operations to 4.5 percent, which compared with the 4.8 percent predicted in July.

The lender added that its forecasts assume a "protracted but ultimately contained eurozone debt crisis".

Further ahead, GDP is expected to expand by 3.2 percent in 2012, which was a hefty downgrade from the prior estimate of 4.4 percent.

"The downward revision in 2012 economic forecasts reflects the prospect of much slower growth in central and south-eastern European countries, which are particularly vulnerable to eurozone stress," added the bank.

"Growth in Russia and other CIS countries is less affected by events in the eurozone and growth there is expected to still be quite strong."

The institution, which tends to invest in private enterprises together with commercial partners, operates in 29 countries from central Europe to central Asia. It was formed in 1991 to help former communist nations in their transition to market economies.

However, the bank plans to expand into the Middle East and North Africa region, after a wave of uprisings in the so-called Arab Spring, and wants to start investing in the area next year.

The EBRD is owned by 61 governments as well as the European Commission and the European Investment Bank.