The European Bank for Reconstruction and Development (EBRD) has downgraded its economic growth forecast for 2025 for the fourth consecutive time, citing concerns over tariffs, global trade tensions, and economic troubles in key nations like Germany and China. The bank’s latest report, released on Tuesday, revised its growth estimate down by 0.2 percentage points to 3%, with most emerging economies across Europe, Central Asia, the Middle East, and Africa facing lower projections.
“Almost no country remains untouched by what’s happening in the world,” said Beata Javorcik, EBRD’s Chief Economist. “The biggest impact on our countries comes indirectly through the changing economic outlooks for Germany and China.”
Among the most affected countries are Slovakia and Hungary, where the EBRD has cut growth forecasts for 2025 by 0.5 percentage points, down to 1.4% and 1.5%, respectively. These countries, which are heavily reliant on the automotive industry, will feel the direct impact of U.S. tariff increases. The report was finalized before news broke of a temporary tariff reduction between the U.S. and China.
Javorcik noted that businesses are now delaying investments as they await further developments. “There’s a big shift in mindset—what was once a focus on the resilience of global supply chains has now turned to concerns about market access,” she said.
Even with the U.S. halting new “reciprocal” tariffs and signaling a willingness to negotiate, projects in many countries are being delayed. The U.S. had imposed tariffs under former President Donald Trump’s strategy to bring manufacturing back to the U.S.
Germany, Europe’s largest economy, remains a significant concern. As the main trading partner for 10 EBRD countries, including the Czech Republic, Slovakia, and Hungary, its economic performance is critical. Exports to Germany account for nearly a quarter of GDP in the Czech Republic, and around 20% in Slovakia and Hungary.
While defense spending boosts could benefit countries like Poland, Turkey, and the Czech Republic, the EBRD warns that such increases might crowd out other vital expenditures. Additionally, Javorcik expressed skepticism about the IMF’s forecast that debt levels in EBRD regions will remain stable at 52% of GDP from 2025 to 2029. She argued that this projection is overly optimistic, as it assumes high revenues and offsetting spending cuts that may not materialize.
“We expect some budget deficits will actually be higher,” Javorcik said.
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