In an environment dominated by higher energy prices, increased uncertainty, and weaker economic growth among trading partners, growth in the Europe and Central Asia region is likely to slow to 2.2 percent in 2026, down from 2.6 percent in 2025, according to the World Bank’s Economic Report published today.
The slowdown in growth is widespread, reflecting weaknesses in most countries of the region. With the exception of Russia, which accounts for about 40 percent of the regional economy, the growth rate is expected to fall to three percent in 2026 compared to 3.7 percent in 2025. Disruptions in the global commodity market have had less impact on economic growth than initially expected, the World Bank highlighted in its report “How to Harness the Potential of Artificial Intelligence: Jobs, Businesses, and Productivity.”
“Developing economies in the region continue to show resilience due to reduced energy intensity, additional government measures, and strong domestic demand,” said Antonella Bassani, World Bank Vice President for Europe and Central Asia.
As she pointed out, to increase competitiveness and help overcome the effects of a declining working-age population, countries in the region can harness the potential of artificial intelligence by strengthening employees’ basic educational and managerial skills, while simultaneously preparing labor market and social protection institutions for these disruptive changes.
Favorable labor market conditions, along with growth in real wages, remittances, the number of tourists, and public investments, have, according to the World Bank, stimulated economic growth. Countries have partially mitigated the impact of higher energy prices on households and businesses through temporary relief measures, although in some countries these measures have also contributed to increased fiscal pressures.
Central Asia remains the fastest-growing subregion, with an estimated growth rate of 5.8 percent in 2026, and projected growth rates of 9.6 percent in Kyrgyzstan and 7.9 percent in Uzbekistan. In the Western Balkans, the growth rate in 2026 is likely to increase to 3.1 percent from 2.6 percent in 2025, while in Central Europe, Poland stands out, with its growth rate remaining at 3.6 percent.
In Ukraine, growth is expected to slow to 1.2 percent, with increasingly significant damage to key infrastructure and hampered exports.
The rise in energy prices has contributed to the continuation of high inflation, while the slowdown in economic growth in the European Union and increasing competition from other countries have negatively affected exports and industrial production, especially within the automotive supply chains in the region, the World Bank stated.
Among the key negative risks remain further trade disruptions and continued hostilities in Ukraine, further increases in the costs of energy, transport, and fertilizers, globally tighter financial conditions, and extreme weather events.
In a special section on artificial intelligence (AI), it is noted that AI is being introduced in the region faster than countries are currently able to adopt it. Approximately one in five workers—mostly highly educated and young—are employed in jobs significantly exposed to the impact of AI.
Currently, only one in ten companies uses AI, and mainly for basic tasks.
The region already has numerous prerequisites for AI, including almost complete mobile network coverage, favorable energy prices, and a large number of workers skilled in technical fields. However, the report notes that the adoption of this technology is hampered by a lack of basic educational and managerial skills, integrated and interoperable data, and computing infrastructure capacity.
“Although the private sector should be the primary driver of AI adoption, adaptation to its impact, and the introduction of innovation, preparing the workforce for AI provides policymakers with a real opportunity to tackle employment challenges and generate growth,” said Ivailo Izvorski, World Bank Chief Economist for Europe and Central Asia.
According to his assessment, the main risk over the next decade in this region will likely be an insufficient degree of AI adoption and adaptation, rather than an excessive presence of this technology.
In addition to increasing the efficiency of existing industries, AI could also enable the creation of new products, services, occupations, and sectors. To achieve this, advanced skills and a much greater inflow of private capital are needed. Countries could encourage the inflow of private capital by expanding access to computing services at favorable prices, thereby creating opportunities for the export of data center capacity and data processing services, provided there is demand for them, the World Bank stated.
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