The World Bank has published its Europe and Central Asia (ECA) Economic Update, forecasting a substantial slowdown in growth across the region’s developing economies in 2026 amid the impact of the conflict in the Middle East, broader geopolitical tensions, and trade fragmentation. Regional growth is projected to weaken to 2.1% in 2026, with higher energy costs expected to weigh on consumption and uncertainty to curb investment. The update expects Russia’s growth to slow to 0.8%, while growth elsewhere in the region is projected to ease to 2.9%. Central Asia is forecast to slow to an average 4.9% in 2026–27 as oil production in Kazakhstan stabilizes, while Central Europe is projected to grow by about 2.4% in 2026 before moderating to 2.3% in 2027, partly supported by European Union-funded public investment. Growth in the Western Balkans is projected to average 3.1% over the next two years, while Ukraine’s growth is expected to slip to 1.2% in 2026 amid continued hostilities, rising energy costs, and fiscal pressures. A protracted and more intense Middle East conflict is highlighted as a key downside risk due to potential disruption to global energy and fertilizer supplies and resulting spikes in energy and food prices. The report also examines increased use of industrial policies in response to weak productivity, finding that nearly two-thirds of current interventions focus on agriculture and food production and only 10% target high-tech or capital goods, and recommends better-defined targeting that supports new, dynamic private-sector firms, reinforces competition, and is used sparingly and temporarily alongside broader reforms to the business environment, entrepreneurship, and education.
World Bank 2026-04-08
World Bank projects Europe and Central Asia developing economies’ growth to slow to 2.1% in 2026 and urges more targeted industrial policy
The World Bank’s Europe and Central Asia Economic Update forecasts growth in developing economies to slow to 2.1% in 2026, reflecting the Middle East conflict, broader geopolitical tensions, higher energy costs and trade fragmentation. It projects Russia’s growth at 0.8%, Central Asia at 4.9%, Central Europe at about 2.4%, the Western Balkans at 3.1%, and Ukraine at 1.2%, and flags an escalation of the Middle East conflict as a key downside risk via energy and food price shocks. The report also notes growing reliance on industrial policies, mostly targeting agriculture and food, and recommends more narrowly targeted, temporary interventions that support dynamic private firms, competition and structural reforms.