The European Bank for Reconstruction and Development said – in a semi -annual report issued today, Thursday, that economic growth in the countries covered by it is slowing down due to poor external demand and the impact of conflicts.
The bank’s reduction in growth represents 0.3% to 3.2% in 2025, the third time in a row that the bank changes the economic expectations of its region to reduce, and it includes emerging Europe, Central Asia, the Middle East and Africa.
The bank warned that the state of ambiguity surrounding customs duties, commercial wars, the decline in European competitiveness and the “peace revenues” of peace, casts a shadow over the prospects of the future.
“We see a weak momentum of global growth,” said Beta Javorchk, chief economist at the European Bank for Reconstruction and Development.
The effect of Germany’s slowdown
She added that while the state of fog for the rules of trade may in itself a “great harmful impact” on trade, investment and production, the slowdown in Germany will have direct direct consequences on the European Bank’s economies for reconstruction and development compared to customs duties.
She added that there are already evidence of the decrease in demand, for example by German auto manufacturers on Roman information technology services.
“What matters to our countries is this continuous difference that has arisen between Europe, the advanced Europe and the United States,” said Javorchk.
She pointed to the data that shows that European companies are behind their counterparts in China and the United States to spend on research and development.
“Peace returns”
The decline in “peace revenues” may deplete this type of investment with countries pump more money in defense spending at the expense of other investments.
“We are witnessing this corrosion in peace revenues, especially in the high interest rate environment, which leads to marginalization of social spending and the removal of spending leading to investment in long -term growth,” she said.
Defense spending increased by almost the same as a percentage of GDP in the regions of the European Bank for Reconstruction and Development over the past decade, from about 1.8% of GDP in 2014 to about 3.5% in 2023, with large increases in Ukraine, Poland, Estonia, as well as in Lebanon, Armenia and Kyrgyzstan.
Jafurcik said that the ability of defense spending to enhance economic growth depends on whether it will benefit the local industry or will focus on imports.
But she added that the European version of the American Defense Research Projects Agency, which is concerned with developing new army technologies, may help in this field.
“If the European Union begins this approach based on the defensive task with pumping significant investments in research and development … the effects of research and development efforts on civil use can enhance competitiveness and innovation in Europe,” she added.
“It can reduce some of the challenges related to Europe’s backwardness from the United States in the field of innovation,” she added.
