A major European development bank has warned that the economies of South-East Europe will face increasing pressure in 2026 due to the combined effects of U.S. tariffs and heightened competition from China.
The European Bank for Reconstruction and Development (EBRD) recently released its latest economic forecast, which downgraded its growth projections for the region. The bank’s chief economist, Beata Javorcik, highlighted that these pressures are a significant concern for the region’s economic stability.
Key factors weighing on the region’s economy:
- U.S. Tariffs: The imposition of U.S. tariffs is creating a difficult environment for exports from South-East European nations. While exports to the U.S. initially grew in anticipation of the new tariffs, they have since declined. The EBRD report noted that the average U.S. tariff on imports from its regions rose significantly. This is particularly challenging for countries heavily integrated into global supply chains.
- Chinese Competition: The report also cited increased competition from China as a major headwind. China has moved up the value chain in its exports, now competing with European firms in sectors that were once a European stronghold, such as vehicles and machinery. This intensified competition is a serious concern for European industries, both in their domestic markets and in third-country export markets.
- Limited Fiscal Headroom: Many governments in the region have limited financial flexibility, making it difficult to implement policies that could cushion the impact of these external pressures. High public debt and elevated interest payments are a concern for several countries in the region, according to the EBRD.
The EBRD’s forecast for the wider region in 2026 is a downward revision, with countries like Romania and those in the Balkans being particularly affected. The bank emphasizes that economies in the region must adapt to a world with less fiscal space, greater trade policy uncertainty, and more intense global competition.
