EBRD: Hormuz closure inflicts 12% Iraqi economic downturn
Shafaq News- London/ Baghdad
The European Bank for Reconstruction and Development (EBRD) expects Iraq's economy to shrink 12% this year as the closure of the Strait of Hormuz disrupts oil exports, marking the sharpest downgrade among the emerging economies covered by its latest outlook.
The bank also cut growth forecasts for several other economies, citing the economic fallout from wars, higher energy prices, rising borrowing costs, and disruptions linked to the closure of the strategic waterway.
In its Regional Economic Prospects report released Thursday, the EBRD forecast a 5% contraction for Lebanon this year as the conflict with Israel weighs on economic activity. It also lowered its forecast for Ukraine as Russian attacks intensify and for Turkiye, where inflationary pressures and tighter financing conditions continue to weigh on the economy.
Across the 41 economies covered by the report, the EBRD expects growth of 2.5% this year, 0.6 percentage point below its June forecast and the second consecutive downgrade.
The bank's chief economist, Beata Javorcik, noted that economic pressures were building, from diesel and wheat prices to borrowing costs, with significant risks still threatening the growth outlook.
Average inflation across the bank's regions of operation remained around 6%, according to the report, with energy accounting for nearly a quarter of the rate.
Global wheat prices have risen about 30% since February, while attacks in the Black Sea region have pushed Ukrainian exports to their lowest level since April 2022.
Ukraine's exports of wheat, vegetable oil, and metals could fall by as much as $5.5 billion this year, equivalent to 2.5% of gross domestic product, as lower water levels in the Danube River and Russian attacks on railway lines disrupt alternative export routes.
Russia and Ukraine together account for about a quarter of global wheat exports, putting additional pressure on food-importing countries, particularly Egypt, which relies on subsidies for bread and grain products.
Read more: No exit but Hormuz: Iraq's economic vulnerability exposed
