EBRD Revises 2025 Growth Forecast for Emerging Economies Amid Challenges

The European Bank for Reconstruction and Development (EBRD) has revised its 2025 growth forecast for emerging economies to 3.1%, marking the first upward adjustment in over a year. While this suggests a tentative economic recovery, the EBRD cautions that rising tariffs, ongoing conflicts, inflation, and high debt levels pose significant risks to sustained growth.

The EBRD's latest Regional Economic Prospects report highlights a complex economic landscape across emerging Europe, Central Asia, the Middle East, and Africa. Despite the slight upward revision in growth forecasts, the report underscores persistent challenges, including regional disparities, escalating debt burdens, and resurging inflation, all of which threaten long-term economic stability.

Established in 1991, the EBRD aims to foster market economies in regions transitioning from centrally planned systems. Its investments span various sectors, promoting sustainable development and economic resilience. In May 2025, the EBRD downgraded its growth estimate for 2025 to 3%, marking the fourth successive cut. The current revision to 3.1% indicates a potential stabilization or improvement in certain economic conditions.

Growth among emerging European countries lags behind the faster pace anticipated in Central Asia, Sub-Saharan Africa, and Turkey. For instance, Central Asia's growth is forecast at 6.2% in 2025, while Turkey's growth is projected at 3.1%.

Debt servicing is becoming a major fiscal burden, with countries like Egypt devoting 14% of GDP to it, compared to much lower figures in Hungary and Poland.

Inflation in the EBRD regions has resurged, averaging 6.4% as of July 2025, driven by expansionary fiscal policies.

EBRD Chief Economist Beata Javorcik emphasized concerns about long-term fiscal sustainability and the global disregard for rising public debt levels.

The average effective U.S. tariff on imports from the EBRD regions rose from 1.4% in the first half of 2024 to 4.0% in the first half of 2025, impacting trade dynamics.

China's share of global manufacturing exports has grown from less than 10% in 2000 to 25% in 2024, intensifying competition for EBRD regions in export markets.

While the EBRD's upward revision offers a glimmer of hope, the underlying challenges necessitate vigilant policy measures to ensure sustainable economic growth across the regions.