Economic expansion across the regions covered by the EBRD is projected to gather pace over the next two years, defying earlier fears of a severe slowdown linked to international trade disputes.
According to the bank’s latest report, released on Thursday, aggregate growth is forecast to rise from an estimated 3.4% in 2025 to 3.6% in 2026, culminating at 3.7% in 2027.
This represents a 0.2% upward revision for the current year compared to projections published last September.
Their most recent report outlines how geopolitical fragmentation has proven less damaging to global commerce than financial markets initially priced in.
“Economies across the EBRD regions are proving more adaptable in the face of persistent trade tensions than many expected”, the bank’s chief economist, Beata Javorcik, stated, while adding that “the US is not a very important market for most EBRD countries, the main impact of the US trade policy on emerging Europe is indirect”.
Speaking to Euronews, Javorcik further explained that “US tariffs affect German exports, which in turn rely on inputs of goods and services from Central Europe, a region that is tightly integrated in German supply chains.”
Contrasting regional economies
While the broader outlook is optimistic, performance varies significantly across distinct geographies.
Central Asia remains a notable outperformer, despite growth normalising to a projected 5.6% in 2026 after a robust 6.9% expansion last year.
The region continues to benefit from solid consumer spending, strong credit expansion and sustained remittance inflows.
Conversely, the immediate economic outlook for Eastern Europe and the Caucasus remains cautious. Regional growth is pegged at 2.9% for 2026.
The EBRD has revised down its forecast for Ukraine to 2.5% for the current year, indicating that the potential economic dividends of any prospective peace settlements will require substantial time to filter into the real economy.
Elsewhere, Turkey is projected to reach a 4.0% expansion rate in 2026, weathering tight monetary policy and market volatility, while the Southern and Eastern Mediterranean region has seen its forecast lifted to 4.2%.
Shifting trade routes
A central theme of the report is the intensifying economic stand-off between the US and China.
As bilateral trade volumes between the two global powers contracted throughout 2025, American importers actively sought alternative suppliers.
Consequently, several EBRD economies stepped into the breach, increasing their exports of computers, mobile phones and precious metals, among other products, to the US market.
Simultaneously, Chinese manufacturers have expanded their export footprint into EBRD territories, leveraging surplus production capacity and highly competitive pricing to gain market share.
Inquired by Euronews, the EBRD’s chief economist described that “there was a lot of concern about the possibility of Chinese exports, whose access to the US market has been restricted, being redirected to other markets”.
However, as Javorcik also explained “these fears do not seem to have materialised in the context of emerging Europe. Nevertheless, China continues to be a strong competitor for producers in emerging Europe, both in their own market and abroad”.
Additionally, EBRD economists caution that the macroeconomic fallout from recent US tariff implementations may still materialise.
The report notes that American buyers heavily frontloaded their import orders in early 2025 to pre-empt rising duties, a move that could temporarily obscure the true, long-term impact on international demand.
Cooling inflation and structural investment
Domestic factors are also underpinning the upgraded economic forecasts.
Average inflation across the EBRD operational footprint cooled to 5.5% by December 2025. This disinflationary trend, facilitated by moderating wage growth and positive real interest rates, is gradually restoring consumer purchasing power.
Capital expenditure remains another crucial growth engine.
Central Europe and the Baltic states are anticipated to see economic activity accelerate to 2.9% in 2026, largely fuelled by a surge in investment as governments rush to meet approaching deadlines for the EU’s Recovery and Resilience Facility.
Similarly, large-scale public infrastructure projects are expected to drive growth in the Western Balkans to 3.1% this year.