European Growth Faces Pressure From US Tariffs, China

Economic growth in southeast Europe is expected to be strained next year by US tariffs, increased competition from China and government budget pressures, Europe’s development bank forecast Thursday.

The London-based European Bank for Reconstruction and Development slightly downgraded its growth forecast for its regions in 2026, while revising upwards its expectations for growth this year.

“The first pressure point everybody has been thinking about is access to the US market,” Beata Javorcik, chief economist at the EBRD, told AFP.

Exports from EBRD countries to the United States grew in the first quarter of the year in anticipation of President Donald Trump’s tariffs kicking in, before declining in the second quarter.

“But these averages hide a lot of differences between countries,” Javorcik said.

For example, Kazakhstan saw increased exports of silver and gold bullion to the United States, while Hungary benefited from shipments of pharmaceuticals and computers.

In contrast, Slovenia’s exports suffered due to its integration into Switzerland’s pharmaceutical supply chains — a country whose imports to the United States are taxed at 39 percent.

The EBRD now forecasts growth of 3.1 percent in 2025, slightly up from its May projection of 3.0 percent.

However, the increase to 3.3-per-cent growth expected next year is weaker than it initially forecast, dragged down by Romania and the Balkan countries.

The institution also cited pressures related to increased competition from China in export markets and limited fiscal headroom in government budgets.

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On Tuesday, the OECD said the global economy will grow more than previously forecasted this year after absorbing the shock of Trump’s tariffs, but it noted that its full impact remains uncertain.

The EBRD was founded in 1991 to help former Soviet bloc nations embrace free-market economies, but has since extended its reach to the Middle East and North Africa.

AFP