The European Bank for Reconstruction and Development (EBRD) has just published its latest report on the economic outlook for Eastern Europe and Central Asia. These analyzes serve as indicators for the global economy.
Euronews interviewed Beata Javorcik, chief economist at the EBRD.
Euronews :
Your latest report on the regional economic outlook is entitled: “On the path to adjustment”. What do the economies you invest in need to adapt to?
Beata Javorcik :
The situation in Europe remains very difficult. Energy prices remain very high. In particular, the price of natural gas is five times higher than in the United States. Demand for exports, particularly from Germany, is weak. Given the difficult situation of the German economy and, finally, the still high borrowing costs, there is this additional risk premium, this additional interest rate that countries in the region had to pay when the war in Ukraine began. And this risk premium continues to exist.
Euronews :
The positives are a fall in inflation and an increase in real wages. What exactly happened?
Beata Javorcik :
From a historical perspective, we have seen a very rapid process of disinflation, even if the adjustment is not yet complete. Inflation remains above pre-Covid-19 levels, but we have managed to avoid a hard landing. Thus, this fight against inflation took place without very significant unpleasant effects in terms of unemployment. When the inflationary episode began, we saw a sharp fall in real wages, but then they started to rise. This was visible during the last months of last year. They have not yet returned to pre-Covid-19 levels, but they have certainly caught up significantly.
Euronews:
What are the inflationary pressures currently?
Beata Javorcik :
Inflation remains high in some countries, such as Turkey and Egypt, with a double-digit rate. And the depreciation of national currencies, which made imports more expensive, contributed to worsening inflation.
Euronews :
How is Ukraine coping with the ongoing war economically?
Beata Javorcik :
Despite the war, at the beginning of the year, in the first quarter, the Ukrainian economy managed to grow very quickly. The Black Sea corridor has enabled Ukraine to export grain as well as metals and minerals. But intensive bombing and destruction of electrical infrastructure took place. This made the situation very difficult. There are power cuts. There are electricity shortages. The country imports electricity from Europe, but at a higher cost. And that weighs on the economy.
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