London (AFP) – Economic growth in Central Europe and the Balkans is expected to be strained this year by US President Donald Trump’s tariff policies, Europe’s development bank forecast Tuesday. The London-based European Bank for Reconstruction and Development has downgraded its growth forecast for the regions, anticipating tariffs fallout owing to their heavy dependence on Germany’s struggling economy.
The United States in April imposed a 10 percent “baseline” tariff on nearly all US trading partners, along with sector-specific levies of 25 percent on cars, steel and aluminium. “Recent changes in US trade policy have left very few countries unaffected,” Beata Javorcik, chief economist at the EBRD, told AFP. For the identified EBRD regions, “the main effect is operating indirectly via the German market,” she added.
Overall, the economies of the countries in which the bank operates should grow by 3.0 percent this year, slightly lower than anticipated in February, according to the institution. While Germany saw a slight rebound in growth at the start of 2025 after two years of recession, the outlook for Europe’s largest economy has been clouded by US tariffs. That adds to problems already felt in its manufacturing sector and as its economy is expected to stagnate this year.
Many Central European and Balkan states rely on exports to Germany to support their economies. Czech exports to Germany account for a quarter of the country’s gross domestic product, while for North Macedonia, it is 20 percent, according to Javorcik. The share is also strong for Slovakia and Hungary and to a lesser extent for Poland and Slovenia. The trade war between Washington and Beijing has also dampened growth prospects in the EBRD regions.
However, Javorcik expressed optimism following a US-China agreement on Monday to slash tariffs, as well as a US-UK trade agreement last week. It “gives us hope that there will be an agreement reached between the EU and the US, which will improve growth prospects” for the European Union, she said. This in turn would “spill over positively onto our regions of operations.”
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. The EBRD’s economic updates coincided with the start of its annual conference being held in London until Thursday and expected to approve the bank’s strategic and capital framework for the next five years. It is also set to mark the start of the bank’s move into sub-Saharan Africa by making Benin, Ivory Coast and Nigeria countries of operation.
© 2024 AFP
