EBRD has reduced its 2026 growth forecast for emerging Europe economies to 3.1%, down from 3.4% last year and half a percentage point below its February estimate. The revision reflects a more challenging economic landscape across the region, with a projected partial recovery to 3.6% for 2027.

First quarter growth already showed weakness at 2.9%, dragged down by Egypt, Kazakhstan, Romania, Türkiye, and Ukraine. Inflation has climbed back to 6.4% and is expected to remain sticky, forcing policy rates to stay higher than previously anticipated.

Bond markets experienced volatility when Middle East tensions spiked in late February, though yields partially retraced. The lasting market impact appears to be widening borrowing costs between different regions, creating a more selective investment environment in emerging Europe.