EBRD Downgrades 2025 Growth Forecast Citing Tariff Concerns and Weak External Demand; Warns of Potential Impact from US Trade Policies

The European Bank for Reconstruction and Development (EBRD) has revised its 2025 growth forecast downward by 0.3 percentage points for its regions, now projecting an average growth rate of 3.2%. This revision reflects concerns over weaker external demand, geopolitical challenges, and slow reform progress. The bank highlighted that conflicts and slow reforms in the southern and eastern Mediterranean are further hindering economic prospects. While a recovery to 3.4% is anticipated in 2026, this is contingent on improved external conditions. Rising uncertainty surrounding potential increases in US import tariffs and reciprocal trade measures are also clouding the outlook. The EBRD warns that higher tariffs could negatively impact trade, investment, and production across its regions. In a scenario where the US imposes a universal 10 percentage point tariff hike, GDP in EBRD regions could decline by 0.1-0.2% in the short term. Countries with significant trade exposure to the US, including Jordan, Hungary, Lithuania, and the Slovak Republic, are expected to be the most affected. Growth projections vary across EBRD regions, with Central Europe and the Baltic states forecast to grow by 2.7% in 2025 and 2.8% in 2026.