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EBRD cuts 2025 growth forecast as trade risks weigh on investments

News RoomBy News RoomFebruary 27, 2025
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EBRD’s 2025 Growth Forecast Updated

The European Bank for Reconstruction and Development (EBRD) has lowered its 2025 growth forecast for its member countries to 3.2%, a decrease of 0.3 points from September 2024. This adjustment reflects heightened concerns from slowing economic growth, trade tensions, and weaker external demand. While the Sustainable Development Goals continue to guide the region, the uncertainties are significant.

Main EBRD Regions’ Growth Analysis

The EBRD predicts slower growth in key regions, including Central Europe, the Baltic states, and parts of the southern and eastern Mediterranean. These areas are expected to grow at or below 3.2% annually in 2025. In contrast, there are notable shifts, with the Western Balkans projected to grow at a higher rate, ending at 3.6%. Central Asia is also expected to grow faster, up to 5.7%, though its 2025 forecast was slightly reduced by 0.2 points due to slower economic activity in Kazakhstan and Uzbekistan.

Moreover, the region experiences more significant declines in growth in areas like the Central Caucasus, where the 2025 growth rate is expected to be around 3.6%. Additionally, Turkey’s growth outlook is unchanged at 3.0%, with a potential increase to 3.5% in 2026, driven by continued inflationary pressure.

Trade Uncertainties and US Tariffs

The report underscores the impact of trade uncertainty on global trade flows, particularly as the U.S. raises tariffs on all imported goods by 10 percentage points (beata javorcik in the abstract). This scenario could reduce economic activity across the EBRD member countries, with central Europe and the Baltic states anticipated to experience a slower recovery in advanced economies. Speaking of economies, the report notes that those with strong trade links to the U.S., including Jordan, Slovakia, Hungary, and Lithuania, are particularly vulnerable to rising tariffs. Fewer businesses are expected to avoid higher tariffs, posing a challenge for foreign direct investment.

On the flip side, regions with preferential trade access, such as Georgia, Albania, Egypt, and Bulgaria, are especially impacted by this event. However, these areas have the potential to shift towards regional integration with countries like the Western Balkans and the Caucasus.

Fiscal Challenges and Defense Spending

Fiscal imbalances are another major concern, with aggregate fiscal balances across EBRD member nations declining by 2.2 percentage points since the pre-pandemic. Given the current economic slowdown, deficits are expected to stabilize at higher levels, including increased spending on military expenses. allegedly has seen a significant rise in defense expenditures, predicted to triple over the past decade.isky a rise in defense spending is likely accompanied by cultural shifts in global supply chains, pushing businesses to rethink investment strategies.

Javorcik discusses howWall related issues have further delayed global supply chains, causing a shift in investment dynamics. While some years ago, Rouamping chooses a language…

Real Growth Outlook

With trade uncertainties impacting global trade and investment flows, the EBRD expects a more mature real growth outlook for the next fiscal year. The region is projected to experience slower growth overall, with Central Europe and the Baltic states set to shrink by up to 5% in 2024. Meanwhile, growth in the Western Balkans is expected to grow by 3.6%, driven by geopolitical tensions that fragment global supply chains.

Meanwhile, turkey remains positioned for a re-emergent growth outlook, with potential for higher growth in 2026 as inflation slows. The U.S.-led West continues to take repositioning with a focus on connector economies, while China’s growing influence is shifting global economic ties.

In summary, the EBRD is grappling with a complex set of challenges, including slower growth, trade uncertainty, and fiscal imbalances. The region is expected to grow at around 3.2% annually, with some slices of the economy facing more severe challenges than others. Population underscores the need for careful policy measures to ensure stability and growth in the coming years.

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