Devanshee Dave
Sep 25, 2025
The European Bank for Reconstruction and Development (EBRD) has released its latest Regional Economic Prospects report for September 2025, titled “Under Pressure,” which indicates moderate growth but highlights several mounting challenges.
The report reveals that the growth across the EBRD regions averaged 2.8% in 2023 and 2024 before accelerating to 3.3% in the first half of 2025, slightly exceeding earlier expectations from May 2025. This positive surprise was primarily driven by stronger performance in the Southern and Eastern Mediterranean, Central Asia, and Turkiye.
However, the outlook is becoming more complex. The report forecasts a moderation to 3.1% growth for 2025 as a whole, before picking up to 3.3% in 2026. This represents a 0.1 percentage point upward revision for 2025 and a 0.1 percentage point downward revision for 2026 compared to previous projections.
Additionally, for the first time, the Regional Economic Prospects report has expanded its coverage to include six economies in sub-Saharan Africa, including Benin, Côte d’Ivoire, Ghana, Kenya, Nigeria, and Senegal, along with Iraq.
Even with these additions, the overall economic picture remains similar, with growth across all EBRD regions averaging 2.9% in 2023 and 2.8% in 2024, before rising to 3.3% in the first half of 2025.
Inflation in EBRD regions has risen since its low in September 2024, surpassing earlier forecasts. This inflationary pressure suggests that more expansionary fiscal policies and other demand-side factors are at play, rather than merely supply-side factors. constraints.
A significant development affecting regional economies has been the increase in US import tariffs that became effective in 2025. The report estimates that these tariff increases have pushed the average effective US tariff on imports from EBRD regions from 1.4% in the first half of 2024 to approximately 4.1% in the first half of 2025.
The impact of these tariffs has been uneven across countries. US imports from Slovenia, Tunisia, and Jordan declined in the first half of the year, while imports from Kazakhstan and Hungary increased, suggesting varying degrees of resilience and adaptation to the changing trade environment. US imports of computers, phones, machinery and gold have also increased, likely reflecting the front-loading of imports ahead of anticipated future tariff hikes.
Competition from China in manufacturing exports has intensified. The report notes that China’s share of global manufacturing exports has grown from less than 10% in 2000 to 25% in 2024, which exceeds the combined shares of the United States and Germany.
As China’s export portfolio has diversified, it now increasingly competes with emerging Europe and Turkiye in manufacturing, while its imports remain more complementary to the exports of commodity-producing economies.
Economic growth in Central Europe and the Baltic states is expected to be around 2.4% in 2025, and it may increase to 2.7% in 2026. The region faces challenges from lower demand for exports, especially from the eurozone, which is an important market. Additionally, efforts to reduce government spending and higher US tariffs could negatively affect the economic outlook.
However, these negative factors are partially offset by higher infrastructure investment, which continues to provide some support for economic activity.
South-eastern EU economies experienced a slowdown in growth to 1.6% in 2024, due to sluggish external demand, a slowdown in investment activity, and more modest fiscal stimulus compared to previous years.
Growth is projected to average 1.7% in 2025 before picking up modestly to 1.9% in 2026.
The modest improvement expected in 2026 reflects anticipated recovery in external demand and stabilisation of investment flows. However, the region remains vulnerable to spillover effects from trade tensions and continued competitive pressures in export markets.
The Western Balkans region is expected to achieve growth of 2.7% in 2025, rising to 3.2% in 2026. The current forecast shows a downward revision from the May 2025 projection, reflecting slower growth in more economically advanced European countries that serve as key trading partners.
A huge factor in the revision is weaker-than-expected construction activity and investment in Serbia, the region’s largest economy. Despite these challenges, the medium-term outlook remains relatively positive as structural reforms continue to advance and integration with European markets deepens.
Central Asia stands out as one of the strongest performing regions in the EBRD area, with a growth forecast of 6.2% in 2025 and 5.2% in 2026.
Several positive factors, including increased domestic consumption, high remittance inflows from migrant workers, and continued fiscal stimulus measures by governments in the region, drive the upward revision for this year.
Additionally, the region has benefited from the redirection of trade flows and investment following geopolitical shifts.
Growth in Eastern Europe and the Caucasus is expected to reach 3.0% in 2025 and accelerate to 4.4% in 2026.
Ukraine’s economic situation remains particularly challenging, with GDP growth for 2025 forecast at 2.5%, a 0.8 percentage point downward revision from previous estimates. Ukraine is facing challenges due to ongoing Russian aggression, now in its fourth year, and poor agricultural harvests.
Turkiye’s economic performance has been driven by stronger domestic demand, with growth picking up to 3.6% in the first half of 2025. The outlook projects moderation to 3.1% for 2025 as a whole, before rebounding to 3.5% in 2026.
The country continues to face challenges. This includes inflation pressures and external financing needs, though policy measures implemented in recent years have helped stabilise the economic situation.
The Southern and Eastern Mediterranean region, now including Iraq, is expected to grow by 3.7% in 2025 and 3.2% in 2026. This region has shown some strength even with tough external conditions and domestic constraints in several economies.
Key challenges here include managing public debt burdens, particularly in Egypt and Jordan, and addressing structural economic issues while maintaining social stability. Tourism recovery, manufacturing exports, and infrastructure development remain important drivers of growth across the diverse economies of the region.
The six economies in sub-Saharan Africa now covered in the EBRD report (Benin, Côte d’Ivoire, Ghana, Kenya, Nigeria, and Senegal) are expected to achieve GDP growth of 4.7% in 2025, slightly edging down to 4.6% in 2026. This is a significantly stronger performance than the EBRD average.
The report also covers digital currency trends across EBRD regions.
Kazakhstan and neighbouring states have become mining hubs, capturing 8% of global Bitcoin mining capacity and generating $1.2 billion in mining revenues in 2024 alone.
On the other hand, five Central and Eastern European economies are advancing central bank digital currencies, with pilot programs managing over €420 million in test transactions.
Cryptocurrency payment channels have lowered transfer costs by 4.3% in remittance-dependent economies, with digital asset transactions increasing 37% year-over-year to $14.6 billion. However, regulatory fragmentation complicates regional financial integration and may cause new capital flow instabilities in vulnerable economies.
The EBRD’s report states that while the immediate economic outlook across its regions remains relatively stable, underlying pressures continue to mount. The difference between regional performances shows an increasingly fragmented economy, with some areas showing growth while others struggle.
The future is indeed under pressure, and how each region adapts to new trade conditions will determine its resilience.
Read the full report here.
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