The World Bank on Wednesday said emerging and developing economies in Europe and Central Asia could see a severe slowdown this year due to a significant but brief increase in energy costs brought on by the Middle East war.
The conflict in Iran, which started in late February, has affected the world’s oil supply and caused prices to skyrocket, increasing business expenses and hurting consumers at the gas pump.
Late on Tuesday, Tehran and Washington reached an agreement on a two-week ceasefire.
The World Bank stated in an updated outlook that the violence presented a significant danger to the world economy, including developing and emerging nations in Central Asia and Europe.
Nearly two dozen nations make up the region, ranging from Kazakhstan and Uzbekistan in Central Asia to Poland and Romania, members of the European Union, Albania and Serbia in the Balkans, Russia, Turkey, and Ukraine.
The majority of nations are energy importers and are anticipated to experience increasing fiscal and current account pressure, even though energy exporters are likely to briefly profit from rising commodity prices.
Growth in the region as a whole is predicted to decrease from 2.6% in 2025 to 2.1% in 2026.
According to the World Bank’s estimate, growth would be somewhat higher at 2.9% if Russia were not included. The World Bank predicted growth of 2.2% for this year in January.
Given the lender’s baseline scenario, gas and fertilizer costs will rise this year, and Brent oil prices will average between $88 and $100 per barrel.
Despite rising oil and gas prices, Russia’s growth is expected to decelerate to 0.8% from 1.0% in 2025, with little fiscal space due to Western sanctions on Moscow for its invasion of Ukraine in 2022.
The World Bank stated, “Any windfall gains from increased oil and gas revenues are likely to be used to contain the deficit rather than finance additional spending.”
Ukraine’s growth is predicted to drop from 1.8% in 2025 to 1.2% as the war continues into a fifth year.
Turkey’s economy is now predicted to grow 2.8% this year, down from 3.7% in the World Bank’s January report, after the lender drastically reduced its growth outlook for the country due to rising energy and food costs.
Growth in Poland was observed to decline to 3.1%. In 2025, both economies expanded by 3.6%.
