European economies are confronting significant challenges, with the European Bank for Reconstruction and Development (EBRD) forecasting strained growth in southeast Europe for next year. The bank points to US tariffs, heightened competition from China, and pressure on government budgets as key factors behind the slowdown. While the EBRD has slightly lowered its 2026 growth forecast, it has raised its expectations for growth this year.
Beata Javorcik, chief economist at the EBRD, highlights access to the US market as a major pressure point. Exports from EBRD countries to the United States rose in the first quarter of the year but fell in the second quarter. However, these averages mask substantial differences between nations. Kazakhstan and Hungary, for example, have seen increased US exports—Kazakhstan benefiting from shipments of silver and gold bullion, and Hungary from pharmaceuticals and computers. In contrast, Slovenia’s exports have suffered because its integration into Switzerland’s pharmaceutical supply chains subjects its goods to a 39 percent US import tax.
The EBRD now projects growth of 3.1 percent in 2025, up from its previous estimate of 3.0 percent, but expects a weaker 3.3 percent growth in 2026, dragged down by Romania and the Balkan countries. The institution also cites pressures from intensified Chinese competition in export markets and limited fiscal headroom for governments.
The OECD has similarly noted that the global economy will grow more than previously forecasted this year, despite the impact of US tariffs, though the full effect of those tariffs remains uncertain. Founded in 1991 to support former Soviet‑bloc nations transitioning to free‑market economies, the EBRD has since expanded its reach to the Middle East and North Africa.
Overall, the forecast underscores the ongoing challenges faced by European economies—particularly in southeast Europe—as they navigate complex global trade dynamics and economic pressures. As the region looks ahead, these challenges are likely to continue shaping growth and development, emphasizing the need for careful economic planning and management in the face of external pressures.
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