EBRD economic forecasts: East and Central Asia in a downward trend!

EBRD economic forecasts: East and Central Asia in a downward trend!

The European Bank for Reconstruction and Development (EBRD) has again revised downwards its economic forecasts for the regions of Eastern Europe and Central Asia. Economic growth is now expected to be just 3% in 2023, down from the previously forecast 3.2% in February and 3.5% in September. Despite an increase in 2026 forecasts to 3.4%, overall economic uncertainty remains high due to geopolitical tensions and trade restrictions. These assessments concern almost 40 countries, stretching from Central Europe to Central Asia, such as South Tyrol News reported.

A key problem is weakened external demand from Western Europe. The increase in import tariffs has had a noticeable impact on trade, causing the tariff burden for the EBRD countries to rise from 1.8% to 10.5%. Slovakia is the most affected, with a GDP burden of 0.8% due to additional tariffs. The tariffs on cars are also influential, accounting for 83% of the additional volume in Slovakia, while in Hungary it is 41%.

Influence of the Ukraine War

Ukraine is particularly affected by the changes, with growth expectations for 2025 reduced to 3.3%. The forecast for 2024 had to be reduced from 5.3% to 2.9% due to the war. Inflation has also increased due to the conflict, reaching 14.6% in March. It is expected to remain high in the first half of the year but to fall to single digits towards the end of the year.

In Russia, GDP growth of 4.3% is forecast for 2024; high military spending is also the reason here. However, there are already signs of slowing growth, with inflation rising to 10.3% in March, largely due to rising food prices. Even for 2025 and 2026, the EBRD only expects modest growth of 1.5%.

Global economic impact

The EBRD has already lowered the growth forecast for 2022 by 2.5% to 1.7% due to the war in Ukraine. This event is rated as one of the largest supply shocks since the 1970s. The Bank highlights that many economies, particularly in low-income countries, have been significantly affected. The decline in raw material supplies from Russia and Ukraine, which provide a significant share of global markets such as wheat and corn, has far-reaching consequences. In North Africa and Lebanon, many economies are highly exposed to the decline in global wheat supply.

The EBRD sees the possibility of a ceasefire within a few months, followed by reconstruction in Ukraine. Nevertheless, sanctions against Russia are likely to remain in place, which could lead the Russian economy into stagnation in 2023, as EBRD predicted.