Economic growth in the developing countries of Europe and Central Asia (ECA) is likely to slow down significantly this year due to the consequences of the conflict in the Middle East, geopolitical tensions, and trade fragmentation, according to the ECA Economic Update prepared by the World Bank Group.
Growth in the region is projected to fall to 2.9% in 2026, as rising energy prices dampen consumption and uncertainty negatively impacts investment. However, Central Asia will remain the fastest-growing sub-region in ECA, even despite the overall slowdown in growth rates.
According to the report, Central Asian countries demonstrated robust economic growth in 2025. The economic expansion rate increased to 7% in 2025, up from 5.8% in 2024, marking the fastest pace in the last 14 years. Household consumption remained high as real wages grew twice as fast as in other ECA countries; a sharp increase in remittances and active expansion of consumer lending were also observed.
Economic growth in Kazakhstan accelerated to 6.5% in 2025—the highest level since 2011. The primary drivers were domestic consumption, large-scale government infrastructure spending, and increased investment by state-owned enterprises. Record crude oil production boosted exports, further strengthening the positive dynamics.
In Uzbekistan, growth accelerated significantly, reaching 7.7% in 2025 (compared to 6.7% in 2024). This was driven by high gold prices, significant investment inflows, real wage growth, expanded lending, and ongoing structural reforms. Nevertheless, the private sector in Central Asia still faces constraints due to significant state control through regulatory mechanisms and the dominance of state-owned enterprises.
Regarding the 2026–2027 forecasts, average growth in Central Asia is expected to decline to 4.9% from last year’s 7%, as oil production growth in Kazakhstan slows down despite high global commodity prices.
Central Asia is likely to feel the negative impact of weakening economic growth in Russia, although high gold prices may help mitigate this effect. Sustained and large-scale infrastructure spending, particularly in the transport and energy sectors, is expected to continue supporting the region’s economic growth, World Bank analysts say.
As noted in the report, ECA countries can utilize industrial policy to accelerate economic growth and create jobs. The region could benefit from better-defined targeting and measures that build future competitiveness rather than entrench existing economic weaknesses.
For example, currently, nearly two-thirds of all industrial policy measures are focused on agriculture and food production, while only 10% are oriented toward supporting high-tech industries or the production of capital goods.
“To achieve stronger growth in productivity and jobs, ECA countries could prioritize ambitious policy reforms that modernize the business environment, catalyze entrepreneurship, and improve the quality of education,” said Ivailo Izvorski, World Bank Group Chief Economist for the Europe and Central Asia region.
According to the expert, tailored public inputs—such as industrial parks or special economic zones—are the most important type of industrial policies that can help address well-identified market failures. But industrial policies have to be used sparingly and only temporarily./// nCa, 9 April 2026