EBRD ups regional 2021 development forecast to 4.2%, warns of tourism, FDI bumps

By Karin Strohecker

LONDON, June 29 (Reuters) – The European Bank for Reconstruction and Development (EBRD) on Tuesday raised its growth forecast for the 37 countries in its region, saying that economic recovery is picking up momentum, although tourism and FDI are still going on are bumpy.

The EBRD, which covers economic trends in Europe, Asia and Africa, expects regional growth of 4.2% this year compared to its September forecast of 3.6%, a report said. This follows a decline of 2.3% last year.

Southeast Europe and the Western Balkans saw the strongest upward revisions with almost 2 percentage points.

The high global demand for raw materials and manufactured goods has boosted some economies in the region, said Beata Javorcik, chief economist at the EBRD.

“Industrial production is above pre-pandemic levels, or at least it has caught up, retail sales have rebounded and exports have rebounded,” Javorcik told Reuters.

However, with tourism still in the doldrums and the outlook for leisure travel very uncertain, countries heavily dependent on the sector – such as Croatia, Georgia, Egypt or Tunisia – were still feeling the pain, Javorcik added.

FDI added to the resistance, staying at around 80% of pre-pandemic levels, the report said.

At the regional level, only the southern and eastern Mediterranean suffered a downward revision of growth forecasts, with Jordan, Tunisia and Lebanon deteriorating their prospects.

In an economic and political crisis, Lebanon is expected to shrink by 5% in 2021 – the only country to experience declining production among the 37 countries covered by the lender.

For Turkey, the EBRD’s largest country of operations, its forecast has been raised by half a percentage point and is now expected to grow by 5.5% this year.

While the recovery seemed broadly according to plan, economies overall struggled to return to pre-2020 levels.

“The recovery leads us in parallel with this pre-pandemic trend,” Javorcik said. “In other words, we’re not catching up right now, and we’re seeing … some points of GDP growth are being permanently lost.”

(Reporting by Karin Strohecker; editing by John Stonestreet)