According to the EBRD’s Regional Economic Outlook, both Moldova and North Macedonia will be affected due to their high dependence on energy and fertilizer imports and limited fiscal space. North Macedonia will also be affected due to the need to import food.
The Middle East conflict has affected the economies of the countries in which the EBRD operates, leading to higher energy and fertilizer prices, disruption to trade and tourism, and tighter financing conditions. By March 20, gas prices in Europe had more than doubled following the shutdown of LNG production in Qatar, and on March 9, oil prices exceeded $100 (€86) per barrel amid risks to global supplies if the Strait of Hormuz remained closed.
A sustained rise in oil prices to $100 a barrel could reduce global economic growth by at least 0.4 percentage points (p.p.) and push up global inflation by more than 1.5 p.p., the EBRD said.
The growth outlook for regions under the EBRD’s control is likely to be cut by 0.4 percentage points when the European lender releases its next forecasts in June if energy prices remain high.
The economic impact of the war will depend on the duration of the conflict and the extent of damage to energy infrastructure, with the impact likely to persist even after the fighting ends. Rising energy, fertilizer and food prices, as well as disruptions in supply chains, tourism and remittances from the Gulf Cooperation Council countries, will put pressure on economic growth while boosting inflation, straining public finances and tightening financing conditions.
Negative effects from developed Europe, especially Germany, a key trading partner for many economies in the EBRD regions, are expected to further slow growth.
Ultimately, the magnitude of the impact will vary depending on each country’s fiscal and external reserves and its ability to mitigate these shocks, the EBRD said.
