Europe and Central Asia: Growth is expected to moderate to 2.4% in 2024 before increasing to 2.7% in 2025.

The latest economic forecast for Europe and Central Asia (ECA) indicates a moderate growth rate of 2.4% in 2024, with an anticipated increase to 2.7% in 2025. In 2023, the region experienced a growth acceleration to 2.7%, attributed to strengthened domestic demand, fiscal support, robust labor markets, and growth resumption in Russia and Ukraine. However, excluding these two nations and Turkey, ECA witnessed a notable slowdown at 1.8% in 2023, impacting 78% of economies. Central Europe faced subdued growth at 0.7%, the lowest among subregions, influenced by weak external demand from the euro area.

The outlook highlights a projected moderation to 2.4% growth in 2024, firming to 2.7% in 2025. Private consumption and exports are expected to be key drivers, supported by reduced inflationary pressures and a gradual recovery in the euro area. Yet, uncertainties around Russia's invasion of Ukraine pose significant risks. Excluding Russia and Ukraine, the region is expected to accelerate to 3.1% growth in 2024 and 3.7% in 2025. Downside risks include conflicts in the Middle East, geopolitical tensions, higher-than-anticipated inflation, a weaker euro area recovery, and external headwinds for Central Asia and the South Caucasus. Delays in EU funds disbursement and accession-related reforms in Central Europe and the Western Balkans are additional concerns. The pace of income per capita convergence is expected to remain sluggish, reaching only 24% of the EU level in 2025.