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The European Bank for Reconstruction and Development (EBRD), a major multilateral institution focused on fostering economic development in emerging markets, has released its latest economic projections, signaling cautious optimism for 2025 while tempering expectations for 2026. In its updated Regional Economic Prospects report, published on September 25, 2025, the EBRD revised its 2025 growth forecast for the regions it serves—spanning Central and Eastern Europe, Central Asia, and parts of the Middle East and North Africa—upward to 3.1%, a modest increase from the previous estimate of 3.0%. However, the bank lowered its 2026 growth projection to 3.2%, down from an earlier forecast of 3.5%. These adjustments reflect a complex interplay of global economic dynamics, regional challenges, and emerging opportunities that are shaping the economic trajectory of the EBRD’s operational regions.
A Modest Upward Revision for 2025
The EBRD’s decision to slightly raise its 2025 growth forecast to 3.1% reflects a combination of resilience in certain economies and cautious optimism about near-term economic stabilization. The bank attributes this upward revision to several factors, including improved performance in key sectors such as manufacturing, trade, and renewable energy, as well as stabilizing macroeconomic conditions in some of its member countries. The 0.1 percentage point increase may seem marginal, but it signals a belief that the regions under the EBRD’s purview are navigating global economic headwinds with a degree of robustness.
The EBRD operates in over 30 countries, from Poland and Ukraine in Eastern Europe to Uzbekistan and Kazakhstan in Central Asia, and Morocco and Egypt in North Africa. These economies are diverse, ranging from resource-rich nations to those heavily reliant on trade or remittances. The slight upward revision in the 2025 forecast suggests that, despite ongoing challenges such as geopolitical tensions, inflationary pressures, and supply chain disruptions, some of these economies are finding ways to adapt. For instance, countries in Central Asia, such as Kazakhstan, have benefited from increased demand for their natural resources, particularly energy commodities, as global markets adjust to shifting supply chains following years of disruptions caused by the Russia-Ukraine conflict and other geopolitical developments.
Moreover, the EBRD notes that investments in green energy and sustainable infrastructure are beginning to yield positive economic dividends in certain regions. Countries like Poland and Romania have made significant strides in renewable energy projects, supported by EBRD financing, which has helped bolster economic activity. These investments not only contribute to GDP growth but also align with the bank’s broader mission to promote environmentally sustainable development. The EBRD’s focus on green transitions has been a cornerstone of its strategy, and the modest growth revision for 2025 suggests that these efforts are starting to bear fruit, albeit unevenly across its regions.
However, the upward revision is tempered by significant risks. The global economy remains volatile, with inflationary pressures lingering in many advanced economies, which indirectly affect the EBRD’s regions through trade and investment channels. Additionally, the ongoing war in Ukraine continues to cast a long shadow over Eastern Europe, disrupting trade routes, energy supplies, and agricultural exports. The EBRD highlighted that while some economies are showing resilience, others remain vulnerable to external shocks, such as fluctuations in global commodity prices or sudden shifts in investor sentiment.
A Downgraded Outlook for 2026
In contrast to the slightly brighter outlook for 2025, the EBRD’s downward revision of its 2026 growth forecast to 3.2% reflects growing concerns about medium-term challenges. The 0.3 percentage point reduction from the previous estimate of 3.5% underscores the bank’s apprehension about several structural and cyclical issues that could impede growth in the coming years. The EBRD points to a combination of factors, including potential slowdowns in global demand, persistent geopolitical uncertainties, and the lingering effects of high interest rates in major economies like the United States and the European Union.
One of the key drivers behind the downgraded 2026 forecast is the expected slowdown in global economic growth, particularly in advanced economies that serve as major trading partners for many EBRD countries. The United States and the Eurozone, for example, are projected to experience slower growth in 2026 due to tighter monetary policies aimed at curbing inflation. This could reduce demand for exports from EBRD regions, particularly in Central and Eastern Europe, where countries like Poland and Hungary rely heavily on trade with Western Europe. A slowdown in these markets could ripple through the EBRD’s regions, dampening economic activity.
Geopolitical risks also loom large in the EBRD’s 2026 outlook. The ongoing Russia-Ukraine conflict, now in its fourth year, continues to disrupt regional stability and economic integration. Ukraine, an EBRD member country, has faced immense challenges due to the war, including widespread infrastructure damage and population displacement. While the EBRD has committed significant resources to support Ukraine’s economy—through financing for reconstruction and humanitarian aid—the uncertainty surrounding the conflict’s resolution poses a major risk to the region’s growth prospects. Neighboring countries, such as Moldova and Romania, also face spillover effects, including energy price volatility and refugee inflows, which could strain public finances and economic stability.
Additionally, the EBRD highlighted the challenge of high borrowing costs as a potential drag on growth in 2026. Many central banks in advanced economies have maintained elevated interest rates to combat inflation, which increases the cost of capital for emerging markets. For EBRD countries, this could translate into higher debt servicing costs, particularly for those with significant external debt. Countries in the Western Balkans, such as Serbia and Montenegro, may face difficulties in accessing affordable financing, which could limit public and private investment in critical areas like infrastructure and education.
Regional Variations in Economic Performance
The EBRD’s report emphasizes that economic performance across its regions is far from uniform, with significant variations driven by local conditions, resource endowments, and policy responses. In Central Asia, for example, countries like Kazakhstan and Uzbekistan are expected to see relatively robust growth in 2025, driven by strong commodity prices and increasing foreign direct investment in energy and mining sectors. Kazakhstan, in particular, has benefited from its role as a key supplier of oil and gas to global markets, especially as Europe seeks to diversify its energy sources away from Russia. The EBRD’s investments in renewable energy and transport infrastructure in the region are also supporting growth, as these projects enhance connectivity and economic diversification.
In contrast, Eastern Europe faces more significant headwinds. Ukraine’s economy, while showing remarkable resilience, remains heavily dependent on external aid and reconstruction efforts. The EBRD estimates that Ukraine’s growth will be modest in 2025, constrained by ongoing security challenges and the need for extensive rebuilding. Neighboring countries like Poland, however, are expected to perform relatively well, benefiting from strong industrial output and EU-funded investments. Poland’s strategic position as a manufacturing and logistics hub in Europe has helped it weather global economic uncertainties, though it remains vulnerable to slowdowns in the Eurozone.
In the Middle East and North Africa, the economic outlook is mixed. Countries like Egypt and Morocco have made progress in implementing structural reforms, supported by EBRD financing, which has bolstered investor confidence. Egypt, for instance, has undertaken efforts to liberalize its economy and attract foreign investment in sectors such as renewable energy and tourism. However, challenges such as high inflation and currency depreciation continue to pose risks. The EBRD’s report notes that North African economies are particularly sensitive to global food and energy price fluctuations, given their reliance on imports.
The Role of the EBRD in Supporting Growth
The EBRD plays a critical role in supporting economic development in its regions, not only through financing but also by promoting structural reforms and sustainable practices. Since its establishment in 1991, the bank has focused on fostering market-oriented economies and supporting the transition from centrally planned systems to open markets. Its investments span a wide range of sectors, including energy, transport, agribusiness, and financial services, with a growing emphasis on green and digital transitions.
In 2025, the EBRD is expected to continue its focus on sustainable development, with a particular emphasis on renewable energy and climate resilience. The bank has set ambitious targets to align its financing with the goals of the Paris Agreement, aiming to make at least 50% of its annual investments green by 2025. This commitment is particularly relevant for countries in Central Asia and North Africa, where renewable energy projects, such as solar and wind farms, are gaining momentum. These initiatives not only contribute to economic growth but also help address pressing environmental challenges, such as reducing carbon emissions and improving energy security.
The EBRD’s support for small and medium-sized enterprises (SMEs) is another key pillar of its strategy. SMEs are a vital component of the economies in many EBRD countries, providing jobs and driving innovation. However, they often face challenges in accessing finance, particularly in the context of high interest rates and economic uncertainty. The EBRD’s financing programs, including credit lines and technical assistance, aim to bridge this gap, enabling SMEs to invest in new technologies, expand operations, and improve competitiveness.
Broader Global Context
The EBRD’s revised forecasts must be viewed in the context of broader global economic trends. The International Monetary Fund (IMF) and World Bank have similarly projected modest global growth for 2025 and 2026, citing challenges such as persistent inflation, high interest rates, and geopolitical uncertainties. For the EBRD’s regions, these global trends have both direct and indirect implications. For example, a slowdown in China’s economy could reduce demand for commodities, affecting resource-rich countries like Kazakhstan and Mongolia. Similarly, a stronger U.S. dollar, driven by high interest rates, could increase debt burdens for countries with dollar-denominated loans.
Trade dynamics are also shifting, with implications for the EBRD’s regions. The reconfiguration of global supply chains, prompted by the Russia-Ukraine conflict and U.S.-China trade tensions, has created both opportunities and challenges. Countries like Turkey and Poland have benefited from “nearshoring” trends, as Western companies seek to relocate manufacturing closer to Europe. However, disruptions in global trade routes, such as those in the Red Sea due to Middle Eastern conflicts, could increase costs and delay shipments, particularly for North African economies.
Climate change remains a critical concern for the EBRD’s regions, many of which are highly vulnerable to its impacts. Central Asia, for instance, faces challenges such as water scarcity and desertification, which threaten agricultural productivity and food security. The EBRD’s investments in climate adaptation and mitigation, such as irrigation systems and renewable energy, are designed to address these challenges while supporting economic growth.
Hypothetical Scenarios and Future Considerations
Looking ahead, the EBRD’s regions face a range of possible scenarios that could shape their economic trajectories. In an optimistic scenario, a resolution to the Russia-Ukraine conflict could unlock significant growth potential, particularly for Ukraine and its neighbors. Increased reconstruction efforts, supported by international donors like the EBRD, could drive investment and job creation. Similarly, a stabilization of global energy and food prices could alleviate inflationary pressures, boosting consumer confidence and economic activity across the regions.
In a more pessimistic scenario, prolonged geopolitical tensions and a deeper global slowdown could exacerbate existing challenges. For instance, a sharp decline in global demand could hit export-driven economies hard, while rising borrowing costs could strain public finances in countries with high debt levels. The EBRD’s ability to navigate these uncertainties will depend on its capacity to mobilize resources, promote reforms, and foster resilience in its member countries.
Conclusion
The EBRD’s latest economic forecasts reflect a cautious but nuanced outlook for its regions, balancing short-term optimism with medium-term caution. The slight upward revision for 2025 highlights pockets of resilience and the positive impact of investments in key sectors like renewable energy and infrastructure. However, the downgraded 2026 forecast underscores the challenges posed by global economic uncertainties, geopolitical risks, and structural constraints. As the EBRD continues to support its member countries through financing and policy advice, its role in fostering sustainable and inclusive growth will remain critical. The coming years will test the resilience of these emerging markets, but with strategic investments and reforms, they have the potential to navigate the challenges and seize new opportunities in a rapidly changing global landscape.
