EBRD revises down growth outlook for 2026 amid energy shock

Wednesday 03 - 15:46

By: Dakir Madiha

EBRD revises down growth outlook for 2026 amid energy shock

The European Bank for Reconstruction and Development has lowered its growth forecast for the economies in its coverage area for 2026. The institution now expects aggregate expansion of 3.1 percent, a decline of 0.5 percentage points compared with its February projection.

The revision reflects the economic impact of rising geopolitical tensions linked to the conflict between Iran and Israel. Higher energy prices and increased volatility in global trade routes have added pressure on already fragile emerging markets.

The slowdown is also visible in recent data. Growth in early 2026 reached 2.9 percent year on year, weighed down by higher oil and gas costs, disruptions in key maritime corridors, and a widening energy price gap between Europe and the United States.

The bank’s coverage region spans Central and Eastern Europe, Central Asia, the Middle East and North Africa. These economies continue to face structural weaknesses, including weak manufacturing activity, persistent inflation and limited fiscal space. Average inflation across these regions stands at 6.4 percent, reducing household consumption and investment capacity.

Several large economies have underperformed expectations, including Egypt, Kazakhstan, Romania, Turkey and Ukraine. Higher energy import costs and tighter financing conditions have amplified external imbalances and slowed recovery efforts.

Despite the downgrade, the institution still projects a rebound in 2027, with growth expected to reach 3.6 percent. However, this outlook remains below earlier estimates, underscoring ongoing uncertainty linked to geopolitical risk and energy market instability. The trajectory of growth will depend on the evolution of regional tensions, maritime security in key shipping routes, and governments’ ability to contain inflation without restricting economic activity.