Europe and Central Asia Economic Update


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Economic activity in the Europe and Central Asia (ECA) region is expected to remain resilient but slow this year as a weaker global economy, slowdown in China, and lower commodity prices weigh on the region’s growth outlook. Regional growth is likely to drop to 2.8 percent in 2024, following substantial strengthening to 3.3 percent last year because of a shift from contraction to expansion in the Russian Federation and war-hit Ukraine, and a more robust recovery in Central Asia. Slow growth further delays the region’s recovery from the effects of past shocks and renewal of economic dynamism. To achieve stronger economic growth and overcome the middle-income trap, countries need to harness the private sector potential and focus on reforms fostering competition, free markets, education, and governance.

GDP Forecast Highlights

  • Ukraine: GDP grew by an estimated 4.8% last year after the economy contracted by 28.8% in 2022. The economic expansion was supported by a record high harvest, rerouting of exports to bypass the Black Sea, a sharp drop in inflation, and a more stable electricity supply.
  • Russia: The largest economy in the region's gross domestic product (GDP) grew by an estimated 3.6% in 2023 as a surge in government spending supported larger social outlays, wages, and investment, especially in industries related to defense, boosting activity in manufacturing and construction. Russia’s crude oil exports remained stable, with energy shipments shifting from the European Union to China and India.
  • Türkiye: In the region’s second largest economy, growth slowed to 4.5% in 2023 from 5.5% in 2022, as a shift toward more restrictive monetary and fiscal policies led to slower growth of private consumption. A surge in investment, thanks to increasing private sector credit and government spending on reconstruction efforts after the February 2023 earthquakes, helped to support the economy.
  • Central Asia: The pace of Central Asia's economic expansion quickened to an estimated 5.5% last year from 4.2% in 2022. In Kazakhstan, the pickup in growth reflected an increase in oil production by 6% in 2023. In the rest of Central Asia, growth was supported by steep declines in inflation, increased government spending, remittances, robust credit growth, and increased trade.
  • Western Balkans: Growth in the Western Balkans dropped to an estimated 2.6 % last year from 3.4% in 2022 because of weaker growth in consumption and exports and despite a robust rebound in tourism and a pickup in construction in some countries.
  • South Caucasus: Armenia and Georgia remained among the fastest growing economies even though the pace of economic expansion slowed. In Azerbaijan, growth weakened sharply to 1.1% last year from 4.6% in 2022 as oil production stagnated because of lower output in the existing oil fields.


GDP Growth Summary 2020-25


ECA excl. the Russian Federation and Ukraine-
ECA excl. the Russian Federation, Türkiye, and Ukraine-
Central Europe-
Western Balkans-
Eastern Europe excl. Ukraine-1.84.0-
South Caucasus-
Central Asia-
Russian Federation-2.75.9-


Unleashing the Power of the Private Sector


Weak productivity growth in Europe and Central Asia in the recent decade has resulted in a sharp slowdown in income convergence with advanced economies. Fundamental drivers of productivity growth, including progress in advancing institutional and market reforms, technology adoption, and innovation, are key for enabling private sector–led growth. Boosting business dynamism in the region will require addressing several challenges, including upgrading the competitive environment, reducing state involvement in the economy, dramatically boosting the quality of education, and strengthening the availability of finance. While meeting these challenges will look different across countries, addressing them is an essential condition to achieve stronger economic growth and overcome the middle-income trap.