The European Bank for Reconstruction and Development (EBRD) has lowered its economic growth forecasts for all three Baltic states for both this year and next year.
According to the bank’s latest projections, Latvia’s gross domestic product (GDP) is expected to grow by 2.0% this year, down from the 2.2% forecast published in February. The forecast for next year has also been reduced by 0.2 percentage points to 2.3%.
The EBRD has likewise lowered Estonia’s economic growth forecast by 0.1 percentage points for this year and by 0.2 percentage points for next year, to 2.1% and 2.3% respectively.
Meanwhile, Lithuania’s GDP is now projected to grow by 3.0% this year and 2.2% next year, compared with the previous forecasts of 3.3% and 2.5%.
The EBRD notes that
economic growth in the Baltic states continues to be supported by resilient household consumption,
rising defence expenditure, and ongoing public investment, including the absorption of European Union funds and the implementation of major infrastructure projects such as Rail Baltica.
At the same time, the region is facing increasingly challenging conditions, including higher energy prices driven by conflict in the Middle East, persistent cost pressures, and weak demand in key export markets across the eurozone and the Nordic region.
According to the bank, the risks facing Latvia are primarily tilted to the downside. These risks include the possibility of a prolonged conflict in the Middle East, delays to the Rail Baltica project, and ongoing difficulties at airBaltic.
The EBRD notes that, similarly to Estonia,
Latvia’s participation in the Nordic-Baltic regional electricity market helps shield the country
from some of the energy market disruptions affecting other European states as a result of tensions in the Middle East.
The bank has also revised downward its forecast for the broader EBRD region, reducing expected economic growth this year by 0.5 percentage points to 3.1%. Growth is forecast to accelerate to 3.6% in 2027.
Ukraine’s economic growth forecast for this year has also been cut by 0.3 percentage points to 2.2%, while growth of 4.0% is expected in 2027.
The EBRD is jointly owned by 64 countries, the European Union, and the European Investment Bank. While European countries hold the dominant position within the institution, other major shareholders, including the United States and Japan, also participate in decision-making.
Founded in 1991, the EBRD was established to assist former Soviet bloc countries in Europe and Central Asia in their transition to market economies. Today, the bank operates in 29 countries.
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