Euro crisis weakens region, EBRD warns

ISTANBUL

Turkish PM Erdoğan (L) shakes hand with the EBRD Head Chakrabarti. AFP photo

European Bank for Reconstruction and Development (EBRD) slashed its 2013 growth forecasts for emerging Europe and North Africa on May 10 by almost a full percentage point, by updating its overall outlook for growth to 2.2 percent for 2013.

Board of Governors Annual Meeting of the EBRD started in Istanbul on May 10, ending on May 11. The EBRD published its latest Regional Economic Prospects report, which contains new forecasts for the transition region, as well.

The EBRD has called for urgent structural reforms in emerging Europe after winding back its economic forecasts. It said the worsening mood reflected a slowdown particularly in Russia, even as the threat from turmoil in the Eurozone appeared to be abating. Weaker activity in other large economies such as Poland and Turkey was also weighing on the outlook.

Turkey decelerated more sharply than expected in the second half of last year despite positive contributions from next exports and public spending after a capital inflow-funded credit boom of 2010-11 came to an end, the report says. At the same time, Turkey appears to have avoided a hard landing. The external current account deficit remains sizeable, financed mainly by portfolio inflows, the report adds. The EBRD foresees 3.7 percent growth for Turkey in 2013 and 4.0 percent in 2014.