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Growth in EBRD regions to hold steady under global pressures

Author: Ksenia Yakustidi

  • Growth in the EBRD regions expected at 3.1 per cent in 2025 and 3.3 per cent in 2026*
  • Pressures from geopolitical tensions, US tariffs, competition from China and limited fiscal space
  • Regional Economic Prospects report now covers sub-Saharan Africa and Iraq

The European Bank for Reconstruction and Development (EBRD) projects growth across its regions to stand at 3.1 per cent in 2025, before picking up to 3.3 per cent in 2026, according to its latest Regional Economic Prospects report.

Entitled “Under pressure”, the new report reflects the strains facing the Bank’s economies, including persistent global geopolitical tensions, increased competition from China in export markets and constrained fiscal space.

The forecast shows a 0.1 percentage point upward revision for 2025 relative to the May 2025 outlook, and a 0.1 percentage point downward revision for 2026. While overall revisions are modest, they mark a growing divergence in growth trajectories between emerging Europe – where downward revisions reflect weak external demand, the need for fiscal consolidation and the impact of higher tariffs set by the United States of America (US) – and the rest of the EBRD regions.

Regional Economic Prospects now covers six new economies in sub-Saharan Africa (Benin, Côte d’Ivoire, Ghana, Kenya, Nigeria and Senegal) and Iraq. With these countries, the overall forecast remains similar: growth is expected at 3.2 per cent this year and 3.3 per cent in 2026.

“Our regions, including the new economies, are adapting to a world of tighter fiscal space, elevated trade policy uncertainty and more intense global competition,” commented Beata Javorcik, the EBRD’s Chief Economist.

“While growth prospects remain broadly stable, the divergence between emerging Europe and other regions underlines the importance of policies that can enhance resilience. Managing debt burdens, safeguarding investment and finding opportunities in new global supply chains will be critical to easing pressures and sustaining momentum.”

The increase in US import tariffs is also shaping the outlook. The average effective US tariff on imports from the EBRD regions rose from 1.4 per cent in the first half of 2024 to 4.0 per cent in the first half of 2025.

Consequently, US imports from Jordan, Slovenia and Tunisia have declined, while those from Hungary and Kazakhstan have increased, as have US imports of computers, phones, machinery and gold, likely reflecting the front-loading of imports ahead of future tariff hikes.

At the same time, competition from China in manufacturing exports is intensifying. China’s share of global manufacturing exports has grown from less than 10 per cent in 2000 to 25 per cent in 2024 – more than the shares of the US and Germany combined.

As China’s exports have diversified, the report notes that China now increasingly competes with emerging Europe and Türkiye in manufacturing, while its imports are more complementary to the exports of commodity-producing economies.

The report also warns of persistent fiscal vulnerabilities. Several economies in the EBRD regions continue to grapple with high public debt and elevated government interest payments as a share of gross domestic product (GDP) – most notably Egypt, Jordan and Ukraine, as well as Ghana, Kenya and Senegal.

Ukraine’s economic outlook remains highly uncertain. GDP growth in 2025 is forecast at 2.5 per cent, showing a 0.8 percentage point downward revision, as the impact of ongoing Russian aggression has been compounded by weak harvests.

Inflation, which had declined to a low point last September, exceeded expectations this year. The renewed pickup indicates more expansionary fiscal policies and other demand-side drivers.

Regional growth projections

  • Central Europe and the Baltic states: Growth is expected to stand at 2.4 per cent in 2025 and accelerate to 2.7 per cent in 2026. Weaker external demand, fiscal consolidation and US tariffs weigh on the outlook, partly offset by higher infrastructure investment.
  • South-eastern EU: While growth slowed to 1.6 per cent in 2024 on sluggish external demand, a slowdown in investment and more modest fiscal stimulus, it is projected to average 1.7 per cent in 2025 and pick up to 1.9 per cent in 2026.
  • Western Balkans: Growth is expected at 2.7 per cent in 2025 and 3.2 per cent in 2026. Downward revisions relative to the May 2025 forecast reflect slower growth in the more economically advanced European countries and weaker-than-expected construction and investment in Serbia.
  • Central Asia: Growth is forecast at 6.2 per cent in 2025 and 5.2 per cent in 2026. The upward revision for this year is driven by strong consumption, high inflows of remittances and continued fiscal stimulus.
  • Eastern Europe and the Caucasus: Growth is expected to reach 3.0 per cent in 2025 and 4.4 per cent in 2026, with a downward revision for Ukraine’s 2025 forecast, as the impact of ongoing Russian aggression has been compounded by weak harvests.
  • Türkiye: Driven by stronger domestic demand, growth picked up to 3.6 per cent in the first half of 2025. It is now expected to moderate to 3.1 per cent in 2025 before rebounding to 3.5 per cent in 2026.
  • Southern and eastern Mediterranean (now including Iraq): Growth for the region is projected at 3.7 per cent in 2025 and 3.2 per cent in 2026.
  • Sub-Saharan Africa: GDP growth is expected to stand at 4.7 per cent in 2025, edging down to 4.6 per cent in 2026.

* Excluding sub-Saharan Africa and Iraq. Growth inclusive of these economies for 2025 is expected at 3.2 per cent and 3.3 per cent for 2026.

Source: Eurostat for EU economies, national authorities and the EBRD.
Note: Weights are based on the values of GDP in 2022 at market exchange rates for the line “EBRD regions excluding SSA and Iraq”, for comparability with forecasts made in May 2025. Elsewhere weights are based on GDP at market exchange rates in 2024. The table also includes forecasts for Belarus and Russia, notwithstanding the fact that Belarus and Russia have had their access to Bank resources suspended under Article 8.3 of the Agreements Establishing the EBRD. “e” denotes unofficial estimates.