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.

“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.

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.

Regional growth projections for 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.