The European Bank for Reconstruction and Development (EBRD) has raised its growth forecasts for the regions where it operates, saying economies have proved more resilient to trade tensions than previously expected and are benefiting from shifts in global supply chains.

In its latest Regional Economic Prospects report, titled “Resilient growth amid continued trade tensions”, the development bank said output across its regions — comprising Emerging Europe, Central Asia, the Southern and Eastern Mediterranean (Semed) and parts of Sub-Saharan Africa — was projected to rise from an estimated 3.4% in 2025 to 3.6% in 2026 and 3.7% in 2027. The 2026 figure marks a 0.2 percentage point upgrade compared with its September 2025 outlook.

“Economies across the EBRD regions are proving more adaptable in the face of persistent trade tensions than many expected,” Beata Javorcik, the EBRD’s chief economist, said in the report.

“Supply chains are evolving rather than retreating, creating new opportunities for diversification and integration into emerging industries, including those linked to AI. Maintaining macroeconomic stability while supporting investment and productivity growth will be essential to sustaining this resilience in an increasingly fragmented global economy.”

Trade turbulence

The report said geopolitical frictions and trade disputes continued in 2025, particularly between China and the United States, resulting in a further drop in direct bilateral trade between the two powers. However, global trade patterns have adjusted rather than contracted sharply.

The US replaced some imports previously sourced from China with goods from other economies, including selected products from EBRD countries. Exports of precious metals, computers, mobile phones and chocolate to the US rose from parts of the EBRD region as Chinese shipments of those goods fell. At the same time, exports from China to the EBRD regions increased.

Javorcik said in an interview with bne IntelliNews the external backdrop had been more supportive than expected.

“External demand remains stronger than we previously expected. There is some turbulence in trade policies but things turned out better than expected so we upgraded the forecasts. Essentially exports from our region to the US remain stable,” she said.

She added that direct exposure to US policy shifts was limited for most EBRD economies. “What matters for our countries of operation is not direct US policy, because the US is not an important market for most of them, it’s the indirect effect through the impact on the German economy that matters more.”

There has been a positive impact from the surge in AI-related investment in the US, which has boosted demand for associated imports.

“One bright spot is the fact the AI boom in the US led to an increase in AI related imports into the US, and some of our countries stand to benefit, countries such as Hungary, Czechia, Estonia, Poland, Latvia and Bulgaria,” Javorcik said.

Public investment buoys growth 

The EBRD said growth was also being underpinned by moderating inflation and major infrastructure projects, which have helped sustain consumption and investment.

Inflation across the regions slowed to 5.5% in December 2025, supported by slower nominal wage growth and positive real interest rates, even as fiscal policy in some countries remained more expansionary than earlier anticipated.

Still, private investment remains constrained by uncertainty. “There is general uncertainty which is detrimental [to private investment]. There is still weakness in the external environment so we are hoping that the German economy will pick up, but last year’s growth was 0.2%. The costs of borrowing have gone down but they still remain elevated,” Javorcik told bne IntelliNews.

Meanwhile, she said, “Large infrastructure projects are supporting investment … There is still a lot of uncertainty — the war in Ukraine is still raging — but public investment is strong in Central Europe, and the deadline for spending the EU’s RRF funding is this year.”

She also pointed to longer-term competitiveness concerns in Europe. “As the Draghi Report correctly pointed out, there is a competitiveness challenge in Europe … It is crucial to use the defence funding to stimulate innovation and one way of doing this is to develop the best defence systems of tomorrow rather than purchasing the best available today.”

Regional outlook

In Central Europe and the Baltic states, growth is expected to accelerate to 2.9% in 2026 from 2.6% in 2025, driven by stronger investment ahead of deadlines for the European Union’s Recovery and Resilience Facility funds, before easing to 2.7% in 2027.

In the South-eastern EU, output is projected to remain broadly stable at 1.5% in 2026, after a slowdown in 2025, as fiscal consolidation in Romania weighs on consumption. Growth is then seen picking up to 2.3% in 2027.

The Western Balkans are forecast to recover from 2.5% growth in 2025 to 3.1% in 2026 and 3.5% in 2027, supported by large public infrastructure projects.

Central Asia outperformed expectations in 2025, with growth estimated at 6.9% on the back of strong consumption, remittance inflows and credit expansion. Growth is expected to moderate to 5.6% in 2026 and 5.3% in 2027.

In Eastern Europe and the Caucasus, growth is projected at 2.9% in 2026 and 3.9% in 2027. Ukraine’s 2025 growth forecast has been cut to 2.5%, as the economic benefits of any potential peace deal would take time to materialise.

“The fact that Ukraine was able to grow is a testament to the resilience of its private sector and the ability of the policymakers to maintain macroeconomic stability,” Javorcik said.

“Last year turned out to be weaker in terms of growth than expected because of the severe damage to energy infrastructure. Given the current situation we hope that the impact of reconstruction will be felt in 2027.”

Since Russia’s full-scale invasion, the EBRD has deployed €9.1bn to Ukraine, including €2.9bn in 2025 alone.

Elsewhere, Turkey is forecast to see growth accelerate from 3.7% in 2025 to 4.0% in 2026 and 4.5% in 2027 despite continued macroeconomic tightening. In the Semed region, growth is projected at 4.2% in 2026, driven in part by a recovery in Iraqi oil output, and around 4.1% in 2027. In Sub-Saharan Africa, growth is expected to moderate from 5.4% in 2025 to 5.0% in 2026 and 4.9% in 2027 after a boost from higher commodity export revenues.