EFSD Regional Economic Outlook Spring 2026

The EFSD has published the spring edition of the Regional Economic Outlook, providing an analysis of the current macroeconomic situation and medium-term prospects for the EFSD member states. The Outlook highlights steady growth in most countries of the region against the backdrop of the ongoing cooling of the Russian economy and persistent inflationary risks.

2025 Results

In 2025, economic growth in Armenia, Kazakhstan, the Kyrgyz Republic, and Tajikistan accelerated, supported by strong domestic demand and expansionary fiscal policies. This impressive economic performance was fuelled by a favourable economic environment, but may also suggest that our economies are becoming more resilient. However, the desired normalisation of economic dynamics has not materialised: the economies of Kazakhstan and the Kyrgyz Republic remain significantly overheated, while in Armenia, the acceleration of growth is primarily explained by external factors. Conversely, Russia and Belarus have entered a cooling phase.

2026–2028 Forecast

The EFSD has revised its 2026 GDP growth estimates upward for most countries (except for Belarus, which saw a decrease, and Tajikistan, which remained unchanged) following stronger results in 2025. Under the baseline scenario for the medium term, the EFSD anticipates a gradual slowdown in economic growth in most countries as positive output gaps close and external conditions normalise. Russia and Belarus are projected to return to their potential growth levels during 2027–2028.

Inflation forecasts for 2026 have been raised for all countries except Belarus; however, more balanced policies are expected to bring inflation down to target levels in most countries over the medium term.
The external sector remains resilient, with stable balances of payments and sufficient international reserves. Given a Russian ruble that is stronger than in the previous forecasting round, the national currencies of partner countries are expected to strengthen.

2026 Risk Scenario

Under the risk scenario driven by the escalation around Iran, it is anticipated that energy-exporting countries and their main trading partners will experience predominant positive effects related to increased export revenues. These positive effects may also translate to other countries in the region through external demand and remittance channels. At the same time, inflationary risks will intensify for all states due to higher import costs, primarily for food and fuel.

The EFSD emphasizes that balancing economic policy and containing inflationary risks will remain a key priority for the region's countries in the coming years.

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