Economics & Development

In September 2024, Storm Boris unleashed record-breaking rainfall and severe flooding across Central and Eastern Europe, notably affecting Poland, Romania, the Czech Republic, Austria, and Southern Germany. At least 27 lives were lost, and billions of dollars in damage were incurred to homes, public buildings, and critical infrastructure. But the effects of the floods were not uniform across countries. While Poland was significantly affected, actions taken after the devastating floods of 1997 to strengthen resilience to floods helped mitigate potential impacts, particularly for communities between Raciborz and Wrocław. In the decades following the Oder River floods, Poland invested in flood defenses, including reinforced dikes and retention basins. Beyond hard infrastructure, Poland also modernized its early warning systems, improving meteorological and hydrological monitoring to enable better prediction and evacuation planning. It also put in place policies designed to strengthen proactive water management and minimize urban expansion into flood-prone areas. Together, this investment in resilience protected more than 2.5 million people and billions of dollars in property from the floods. With climate change accelerating in Europe and Central Asia (ECA), events like Storm Boris and other climate-induced events such as droughts, wildfires, and heat waves are expected to become more regular and more intense. The economic impacts from short-term shocks and disruptions, along with longer-term effects of a changing climate, will be significant in most ECA countries in the coming decades. Modest investments in climate adaptation as part of a coordinated package of resilience instruments can mitigate a significant share of these costs and limit the impact of losses, while delivering strong economic returns. Yet, adaptation by households, firms, and governments in ECA is lagging, and resilience is weak, making poorer countries, regions, and households increasingly vulnerable to climate risks. This special feature focuses on the implications of increasing exposure to climate hazards in ECA and assesses countries’ capacity to respond by adapting and building resilience.

In 2025, GDP growth reached 5.6 percent (2.1 percent per capita). Lower food and transport prices pushed inflation to -2.6 percent, reducing poverty to 40.7 percent (US$3.00, 2021 PPP). Growth is expected to remain robust, supported by non-oil expansion. Higher oil prices from the Middle East conflict could boost exports and fiscal revenues but may also increase transport costs, raising the import bill and fueling inflation.

Economic activity was moderate in 2025, but a rebound in construction, following partial arrears clearance, strengthened momentum; real GDP growth is estimated at 4.9 percent, up from 4.7 percent in 2024. A wide fiscal deficit and elevated public debt remain Kenya’s main macroeconomic challenges, requiring decisive action. Medium-term priorities to create jobs and reduce poverty require stronger fiscal management, improved governance, and enhanced competitiveness.

Tunisia’s economy grew by 2.5 percent in 2025, driven by agricultural recovery and increased manufacturing activity. With limited external financing, elevated debt levels, and the conflict in the Middle East, the outlook remains uncertain. To boost economic growth, sustain poverty reduction, and keep public debt at sustainable levels, Tunisia would benefit from engaging in fiscal adjustment, improving the business environment, and facilitating competition.

The economy expanded 3.4 percent in 2025, with growth expected at 2.7 percent in 2026. Job creation is expected to bring poverty down to 33.4 percent. Yet subdued productivity growth and weak public service delivery remain binding constraints on growth, jobs, and poverty reduction. Fiscal slippages, climate shocks, and lower commodity prices represent key downside risks.

Nicaragua’s economy grew by 4.9 percent in 2025, driven by construction, mining, and retail, and is expected to grow by 3.4 percent in 2026, supported by remittances and construction. Poverty is estimated to have fallen below 14 percent in 2025. Public debt declined to 50.7 percent in 2025 and is projected to reach 48.3 percent in 2026, driven by growth and prudent fiscal policies.

Tourism continues to underpin the Bahamian economy, yet its small scale, import dependence, climate threats, skills gaps, and marked inequality curb longer-term prospects. Recent gains in construction and cruise traffic are offset by hotel capacity bottlenecks, limiting growth and labor market gains. While prices stay subdued and revenues rise, growth is set to cool gradually, slowing the public debt decline.

GDP growth slowed to 2.5 percent in 2025, as supply-side constraints in mining mitigated the impulse from rising investment. Inflation eased into the tolerance band, but the fiscal deficit overshot its target. Growth is expected to edge down in 2026, and poverty is projected to continue its steady decline.

Economic growth decelerated to 1.4 percent in 2025, reflecting a steeper contraction in the hydrocarbon sector and sluggish expansion in the non-hydrocarbon sector. Inflation moderated in 2025 as domestic demand eased. External and fiscal surpluses narrowed as hydrocarbon-related inflows declined. Growth is expected to pickup modestly in the medium-term, due to less pronounced decline in hydrocarbon output and a gradual recovery in non-hydrocarbon activity.

Uzbekistan’s economy grew 7.7 percent in 2025, driven by export recovery and private consumption. Growth was pro poor, with national poverty falling from 8.9 percent in 2024 to 5.8 percent in 2025. GDP growth is projected at 6.4 percent in 2026, broadly in line with the economy’s estimated potential growth. The outlook remains positive, assuming sustained strong reform momentum, which will boost private sector growth and job creation.

In 2026, growth is projected to decelerate at 3.1 percent, supported by EU funded investments, despite the expected commodity-price shock induced inflation. Tight labor markets and fiscal challenges remain a concern; the latter limiting potential mitigation measures on energy prices. Downside risks arise from global uncertainty from the conflict in the Middle East; the region has become Poland’s primary supplier of crude oil since the onset of the war in Ukraine.

Growth strengthened in 2025, driven by highway construction and services. Rising wages, together with food and services price increases kept inflationary pressures elevated. Revenue shortfalls and an increasing debt stock highlight the need for timely fiscal consolidation. Outlook projections are contingent on sustained reform implementation and subject to significant downside risks, including uncertainty stemming from the Middle East conflict.