Projected Europe and Central Asia Economy Growth Rates Stands at 2.5% According to the World Bank
Hitting the Brakes: Central Asia's Economic Forecast for 2025-2026
The bustling skyline of Astana, the financial hub of Central Asia, seems at odds with the economic forecasts on the horizon. According to the World Bank's Economic Update released on April 23, growth in the developing economies of Europe and Central Asia is expected to decelerate to 2.5% for 2025-26. This slowdown is primarily attributed to weaker external demand and a slump in Russia.
In the year preceding, 2024, growth across the region had stabilized at 3.6%, thanks to private consumption, robust real wage increases, higher remittances, and expanded consumer borrowing. However, these factors couldn't entirely offset the weak external demand caused by low growth in the European Union. Rising food and services prices pushed inflation to 5% year-on-year by February 2025, up from 3.6% in mid-2024. Consequently, several central banks raised policy rates or delayed further easing.
Central Asia, though, is forecast to continue as the region's fastest-growing sub-region, albeit at a slower pace. The growth is projected to ease to 4.7% mainly due to a slowdown in Kazakhstan's oil sector, declining exports, and the normalization of remittance inflows.
World Bank Vice President for Europe and Central Asia, Antonella Bassani, acknowledged the region's steady growth in the past year but emphasized that maintaining it has become more challenging amid global uncertainty, geoeconomic fragmentation, and weak expansion among key trading partners. She stressed the importance of accelerating domestic structural reforms to foster a dynamic private sector, entrepreneurship, and Technology adoption to achieve long-term, stronger economic expansion.
Transformation and innovation are at the heart of the report's recommendations for the region. Countries should boost innovation, support young companies, deepen financial markets, and increase investments in research and development to remain resilient against external pressures.
While the IMF and World Bank offer slightly varying outlooks, both acknowledge the moderating growth linked to structural factors and external pressures. The IMF revised Central Asia's GDP growth upward to 4.9% in 2025 and 4.3% in 2026, reflecting stronger domestic demand and fiscal support. However, it highlights risks from global economic conditions, including potential oil price volatility impacting hydrocarbon-dependent economies like Kazakhstan.
On the other hand, the World Bank projects a broader regional slowdown, with Central Asia specifically easing to 4.7% annually. Key factors include Kazakhstan's oil sector deceleration, weak demand from key trading partners, and regional inflation reaching 5% year-on-year by February 2025. Both institutions underscore the need for structural reforms to mitigate reliance on hydrocarbons and external shocks.
- Maintaining the growth in Astana, the financial hub of Central Asia, could be challenging, considering the emphasis on accelerating domestic structural reforms to foster a dynamic private sector, as suggested by World Bank Vice President Antonella Bassani.
- During the year 2026, it's projected that Central Asia will sustain a growth rate of 4.7%, although this is predicted to be a slower pace mainly due to a slowdown in Kazakhstan's oil sector and declining exports.
- To remain resilient against external pressures, countries in the region should focus on boosting innovation, supporting young companies, deepening financial markets, and increasing investments in research and development, as recommended in the Transformation and Innovation report.
