EFSD presented its “Regional Еconomic Outlook. Summer’26”

The Eurasian Fund for Stabilization and Development (EFSD) has released its summer update to the Regional Economic Outlook (REO), updating its assessment of economic developments in the region for 2026-2028.

The slowdown in economic activity seen earlier this year was driven mainly by one-off, unforeseen factors. In Russia, construction activity declined due to a colder and snowier winter. In Kazakhstan, oil production temporarily fell following a technical incident at the Tengiz field. In Armenia, the financial sector contracted. In Belarus, the weak start to the year stemmed primarily from a deterioration in external conditions. Kyrgyzstan and Tajikistan, by contrast, maintained strong economic growth. EFSD expects economic activity to rebound in the second quarter with early signs already visible in operational data from Belarus and Kazakhstan. For full-year 2026, GDP growth is now expected to be slightly lower than previously forecast: 0.6% in Russia, 5.0% in Kazakhstan, 5.5% in Armenia, 1.3% in Belarus, 8.5% in Kyrgyzstan, and 7.1% in Tajikistan.

Domestic demand remains the primary driver of economic growth across the region. Investment activity remains strong across almost all countries in the region. Kyrgyzstan recorded the most dynamic investment growth, with fixed capital investment rising 69.7% year-on-year over the first four months of the year. Russia is the exception, where investment activity is slowing under the weight of high real interest rates and persistent uncertainty. In most countries in the region, retail trade continues to grow steadily, supported by rising household incomes, expanding consumer credit and higher remittance inflows.

Conditions in the external sector remain mixed. External demand has made a significant contribution to growth in Armenia. In Kazakhstan and Tajikistan, exports are being supported by favorable commodity prices. Belarus is feeling the effects of weak external demand from Russia, while Kyrgyzstan's exports declined largely due to a sharp drop in gold shipments.

Inflation trends across the region are diverging. Price pressures are gradually easing in Russia, Kazakhstan and Belarus, while they have intensified in Armenia, Kyrgyzstan and Tajikistan. The main drivers are rising global energy and food prices, along with resilient domestic demand. As a result, end-2026 inflation forecasts have been revised upward for Kyrgyzstan and Tajikistan.

Against the backdrop of changing inflation dynamics, the central banks of Russia, Kazakhstan and Belarus have cut interest rates, though monetary policy and forward guidance from the Bank of Russia and the National Bank of the Republic of Kazakhstan (NBRK) remain tight. Refinancing rates in Armenia and Tajikistan have held steady despite mounting inflationary pressure. The National Bank of the Kyrgyz Republic (NBKR) has not raised its rate since February.

Regional currency markets remained broadly stable. Most national currencies strengthened against the US dollar, tracking the Russian ruble. Kyrgyzstan and Tajikistan were the exceptions, where exchange rates against the dollar were largely unchanged. At the same time, in several countries, depreciation against the Russian ruble added further inflationary pressure.

Fiscal policy across the region continues to diverge. Russia is maintaining an expansionary budget policy. In Kazakhstan, a formal improvement in the fiscal position was accompanied by a substantial increase in quasi-fiscal investment. In Kyrgyzstan, according to EFSD estimates, a significant share of government spending was financed outside the budget. Armenia and Tajikistan continue to pursue a conservative fiscal approach.

"The balance of risks for the Eurasian region over the 2026-2028 horizon remains mixed," said Sergei Ulatov, Chief Economist at EFSD.

"On one hand, we see potential for faster growth in a number of countries, supported by additional stimulus measures and a possible improvement in the external environment. On the other hand, inflation remains the key challenge for most economies in the region, fueled not only by volatility in global food and energy prices but also by continued pressure from strong domestic demand."

• EFSD Regional Economic Outlook Summer 2026.pdf

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• EFSD Regional Economic Outlook Summer 2026_onepager.pdf

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