Paris [France], March 27: The European Bank for Reconstruction and Development (EBRD) warned on Thursday that tensions in the Middle East are likely to weigh on growth across the regions it operates in, due to higher energy and fertilizer prices, disruptions to trade and tourism flows, and tighter financing conditions.
Growth forecasts for certain developing markets are likely to be revised down by as much as 0.4 percentage points in the next regional economic outlook in June if energy prices remain elevated, according to the development bank.
Oil prices have surged since the U.S. and Israel launched strikes on Iran, which retaliated by effectively closing the key Strait of Hormuz.
Last month, the bank said it expected 3.6% growth this year and 3.7 percent in 2027 in the roughly 40 countries it covers.
"The direct negative effects on GDP (gross domestic product) growth via energy costs, the price of fertilizers and food staples, disruptions to supply chains, tourism and remittances from the GCC (Gulf Cooperation Council) will be compounded by higher inflation, greater pressures on government budgets and tighter financing conditions in response to rising inflation," it added.The analysis said that if oil prices stay above $100 per barrel for an extended period and supply chain disruptions in chemicals and metals continue, global economic growth could decline by at least 0.4 percentage points, while inflation could rise by more than 1.5 percentage points.
The impact of the tensions is also being felt across agricultural inputs and industrial supply chains. A significant share of global trade in fertilizer feedstocks passes through the Strait of Hormuz, heightening the risk of rising food prices.
Disruptions along Gulf trade routes could also affect critical inputs such as aluminum, sulfur, helium, petrochemicals and plastics, adding to global inflationary pressures.
Source: Qatar Tribune
