This comes after a similar downgrade in February and reflects increasing global headwinds, including rising trade policy uncertainty, weakening external demand, and newly imposed tariffs.
The steepest downward revisions were recorded in Central Europe, the Baltic states, and the Western Balkans.
"It is clear that our regions are facing heightened uncertainty and slower growth," said Beata Javorcik, Chief Economist at the EBRD, calling for a reduction in trade tensions through constructive dialogue.
Ukraine's growth forecast was revised down to 3.3%, reflecting weaker EU demand and continued damage to energy infrastructure caused by Russian attacks.
Meanwhile, newly imposed U.S. tariffs—including 25% on steel, aluminium, and automobiles—are expected to raise the average effective tariff on EBRD-region exports to the U.S. from 1.8% in 2024 to 10.5%.
Slovakia is projected to suffer the largest GDP impact from U.S. tariffs (–0.8%), followed by Jordan (–0.6%) and Hungary (–0.4%), primarily due to disruptions in the automotive sector. Even countries with limited direct exposure face risks stemming from supply chain disruptions and global policy uncertainty. While China's role in global trade expands, Germany remains the key export partner for many EBRD economies.
Inflation accelerated again to 6.1% in February 2025, up from 5.3% in September 2024, driven by loose fiscal policy and rapid wage growth.
Public debt is expected to remain around 52% of GDP over the next four years, assuming fiscal discipline and spending cuts to offset rising defence, industrial, and interest-related expenditures.
The report warns that increased reliance on bond markets over concessional borrowing may further strain lower-income countries.
Defence spending has nearly doubled in EBRD regions since 2014, reaching 3.5% of GDP in 2023.
Countries like Slovakia, Greece, Croatia, and Hungary could see up to a 1.5% increase in GDP from stronger demand for domestically produced defence goods.
In Central Europe and the Baltic states, GDP growth is forecast at 2.4% in 2025, a downgrade from earlier projections, before rising to 2.7% in 2026.
The revision reflects weaker demand from Germany and heightened global political uncertainty.
In Southeast Europe, growth is expected to rebound from 1.6% in 2024 to 2.0% in 2025 and 2.4% in 2026, with Bulgaria showing slightly stronger prospects due to resilient domestic demand.
Meanwhile, in the Western Balkans, growth is projected to slow from 3.6% in 2024 to 3.2% in 2025, before gradually rising to 3.4% in 2026, as political instability in Serbia and slower growth in advanced European economies weigh on regional performance.
Updated GDP Growth Forecasts for 2025:
- Poland: 3.3% (down from 3.4% in February)
- Czech Republic: 1.6% (down from 1.9%)
- Slovakia: 1.4% (down from 1.9%)
- Hungary: 1.5% (down from 2.0%)
- Romania: 1.6% (down from 1.8%)
