World Bank sounds alarm on Europe, Central Asia economic outlook

Emerging and developing economies in Europe and Central Asia will experience slower growth in 2026 due to the effects of higher energy prices brought on by the ongoing conflict in Iran, according to a World Bank report released on Wednesday.

This surge has increased operating costs for businesses and raised fuel expenses for consumers.

Although Tehran and Washington reached a two-week ceasefire agreement late Tuesday, the financial institution noted that the broader economic risks remain substantial.

Regional impact and economic pressures

The World Bank highlighted that the conflict poses a substantial risk to global economic stability, particularly affecting developing and emerging markets in Europe and Central Asia.

The region spans nearly two dozen countries.

It includes Kazakhstan and Uzbekistan in Central Asia, European Union members Poland and Romania, Balkan nations such as Albania and Serbia, as well as Russia, Turkey, and Ukraine.

While energy-exporting countries in the region may temporarily benefit from elevated commodity prices, the majority are energy importers.

These economies are likely to experience heightened fiscal strain and widening current account deficits due to increased import costs.

Revised growth forecasts

According to the World Bank’s updated projections, overall economic growth across the region is expected to slow to 2.1% in 2026, down from 2.6% in 2025.

If Russia were excluded, then the growth would be slightly higher at 2.9%.

This revised estimate is marginally below the World Bank’s January forecast, which had projected growth at 2.2% for the year.

The baseline scenario assumes Brent crude oil prices will average between $88 and $100 per barrel in 2026, alongside elevated prices for natural gas and fertilisers.

Country-specific outlooks

Russia’s economy is projected to expand by 0.8%, compared with 1.0% growth in 2025, despite benefiting from higher oil and gas prices.

The World Bank stated, “Any windfall gains from higher oil and gas revenues are likely to be used to contain the deficit, rather than finance additional spending,” pointing to continued fiscal constraints.

Ukraine, now entering the fifth year of conflict, is also expected to see slower growth, with projections falling to 1.2% from 1.8% in 2025.

Turkey’s growth outlook has been significantly downgraded due to rising energy and food costs, which are weighing on domestic consumption.

The economy is now expected to grow by 2.8% this year, compared to the earlier estimate of 3.7% in January.

Similarly, Poland’s growth is forecast to ease to 3.1%, after both Poland and Turkey recorded growth of 3.6% in 2025.

Broader economic risks

At a broader level, elevated prices for key commodities are expected to remain a drag on economic activity, particularly for import-dependent nations.

As geopolitical tensions persist, policymakers across the region may face difficult trade-offs between managing inflationary pressures and supporting economic growth.