The ongoing war in Ukraine has dimmed prospects of a post-pandemic economic recovery for emerging and developing economies in the Europe and Central Asia region, says the World Bank’s Economic Update for the region, released today.

According to the report, the economic activity will remain “deeply depressed” through next year, with minimal growth of 0.3% expected in 2023, as energy price shocks continue to impact the region. Regional output is now expected to contract by 0.2% this year, reflecting above expectation growth in some of the region’s largest economies and the prudent extension of pandemic-era stimulus programs by some governments.

Now, with this said, Sebastian Molineus, World Bank Regional Director for the South Caucasus noted that in the South Caucasus sub region, “there is quite a strong growth trajectory, and we see output going up by 5.6%. In fact, that’s the largest increase in the entire Europe and Central Asia region.”

“When it comes to Georgia itself, we see a growth rate of 8.8%, which right now is the highest in the entire Europe and Central Asia region, largely based on an increase in domestic demand, increase in net money transfers, as well as a strong tourism receipts and remittances as well. With this said, we believe that both government and the National Bank of Georgia need to remain vigilant. Certainly, there needs to be a tightening of monetary policy, should the inflation still tick upwards. And we encourage, of course, government to remain fiscally prudent and to use any additional revenues to pay off as some of its fiscal burden and to act in a fiscally prudent manner,” Molineus stated.

World Bank Regional Director said, the outlook looks “rather challenging” for the European and Central Asia region (ECA region). The WB expects output to contract by 0.2 percent in 2022, largely due to the Russia’s invasion of Ukraine.

“And we expect that growth overall in the ECA region will remain low at about 0.3%, given the current high inflation rates, the global tightening of financial markets and challenging fiscal situations in the region.

One final point is that the World Bank’s Economic Update will have a special focus on social protection measures, which are absolutely critical in terms of addressing large increases in poverty during crisis. And here we advise all of our member countries to modernize their social protection systems, and to make sure that there is an appropriate TSA targeting the social assistance to those people who needed it most during these particular times of crisis,” Sebastian Molineus asserted.

“Social protection systems, which are the bedrock of anti-poverty efforts, need to be made more effective in the face of shocks as well as longer-term challenges.” – @bjerde_anna @WorldBank Vice President for Europe and Central Asia. https://t.co/8rGdfnjtn8 pic.twitter.com/XRRRlfMxgV

— World Bank Europe and Central Asia (@WorldBankECA) October 5, 2022