In 2022, the EBRD recorded a net loss of €1.7 billion due to the war in Ukraine

Author

Kira Ivanova

In the third quarter of 2022, the EBRD recorded a net loss of €1.7 billion, following a net profit of €2.5 billion in 2021.

The European Bank for Reconstruction and Development (EBRD) reported this in an investment report for December 2022 published on January 9.

"The conflict in Ukraine continues to have a direct impact on the Bank’s financial results," the EBRD states.

The bank explained that it had to substantially revalue equities based in Russia, Ukraine, and Belarus in the first quarter and significantly increase expected credit losses against loans based in those three countries. The value of these equities has dropped by more than 90% since the end of the year.

Help for Ukraine

The Bank will commit up to €3 billion over 2022–2023 to help Ukraine’s businesses and economy keep functioning. The EBRD pledges to support businesses and public services across all sectors affected by the war in

Ukraine and neighboring countries:

Ukraine’s energy and food security needs;
investing in improvements in municipal infrastructure to provide energy, water and wastewater services, and other needs;
supporting internally displaced persons.

The EBRD pointed out the global impact of the war on the world’s economies

The Bank emphasized that the growth of economic output in the EBRD regions decreased because of the war in Ukraine from 6.8% in 2021 to 2.3% in 2022. The EBRD also forecasts 3% growth in 2023, stressing that reduced supply of gas is creating mounting inflationary pressures.

The Bank was compelled to revise down its global growth forecasts sharply due to high inflation, a slowdown in China, and spillovers from the war in Ukraine.

There are further downside risks if hostilities escalate or Russian energy and commodities see further export/import restrictions.
Russia is an important trade partner for some economies especially in the Caucasus, but also in the Baltics and Central Asia.
Ukraine is closely integrated into the manufacturing supply chains in Central Europe.
Many economies in the EBRD regions are highly dependent on Russian gas. Gas is the largest source of derived heat production, in some economies it is also important for electricity production. Electricity consumption is high in the EBRD regions relative to countries’ level of development; GDP is also more energy-intensive than in advanced Europe.
Average inflation reached 16.5% in July 2022 in EBRD’s countries of operations — it is in double digits in over 80% of economies in the EBRD’s regions.
High food and energy prices, supply chain disruptions and in some economies tight labor markets and strong wage growth push up inflation.
Most currencies in the EBRD’s regions have weakened since the start of the war.
88% of central banks in EBRD’s countries of operations hiked policy interest rates between May 2021 and July 2022.
Over two thirds of EBRD’s countries of operations introduced fuel subsidies per unit consumed.