EBRD Economies Face Pressure from US Tariffs, Chinese Competition, and Fiscal Constraints

EBRD Growth Projections and Key Challenges

• 📊 The European Bank for Reconstruction and Development (EBRD) projects 3.1% growth for its operating regions this year and 3.3% next year, with slight upward revisions for 2025 and downward for 2026.
• ⚠️ Key hurdles identified include the impact of US tariffs, intensifying Chinese competition in export markets, and increasingly restricted fiscal space.

Impact of US Tariffs on Exports

• 📈 In the first half of the year, some EBRD countries saw increased exports to the US, such as Kazakhstan (bullion) and Hungary (computers, pharmaceuticals).
• 📉 However, this increase was largely due to frontloading exports before tariffs took effect, and a dampening impact is expected going forward.
• ⚠️ Slovenia experienced a significant drop in pharmaceutical exports to the US.

Intensifying Chinese Competition

• 🌍 The report highlights that China is increasingly competing with Eastern European EU member states, Germany, and France, not just dumping products on the European market.
• 🎯 In the medium term, Chinese exports are becoming more similar to those of these European countries, leading to increased competitive pressure in third markets.

Sub-Saharan Africa: Growth and Debt Concerns

• 🚀 The EBRD now covers six new economies in sub-Saharan Africa, experiencing strong growth driven by commodity exports like gold and petroleum.
• 📈 These countries are also facing relatively high inflation and growing debt servicing costs.
• 💰 The increasing cost of debt repayments is consuming a substantial portion of government budgets, limiting fiscal space.

Ukraine's Wartime Economy

• 🇺🇦 Ukraine's economy is facing challenges but has maintained macroeconomic stability due to significant financing from the EU, G7, and IMF, alongside EBRD support of €8.4 billion.
• 🌾 Firms are experiencing labor shortages, and this year's harvest was weaker due to weather and battlefield activity.
• ⚡ There is concern about potential electricity shortages if bombing continues, despite no reported shortages in the summer.