By Libby George and Karin Strohecker
LONDON, Feb 26 (Reuters) - U.S. tariffs have rerouted trade, but not dented it as much as feared, allowing larger-than-expected economic growth in certain developing markets, the European Bank for Reconstruction and Development said on Thursday.
Growth in the 40 countries covered by the development finance institution rose by a larger-than-forecast 3.4%, but the bank warned that continued trade turmoil could yet derail growth in some of the economies.
"The picture
is somewhat more optimistic than in the autumn...and we expect this year and next year to be even better than last year," the EBRD's chief economist Beata Javorcik told Reuters.
Slowing inflation and big spending on infrastructure projects - particularly in Europe - were helping, but the report also showed that the impacts of U.S. President Donald Trump's trade tariffs were not as stark as expected.
The bank now expects 3.6% growth this year and 3.7% in 2027 - both a 0.2 percentage point upward revision compared with its autumn projections.
Exports from some EBRD countries to the United States even grew, particularly those related to the AI boom, as those countries replaced China's exports.
Hungary, the Czech Republic and Poland all export AI-related products such as servers, processors and computing systems that mean they could benefit from the shift.
But Javorcik warned that the full impact of the tariffs remained unclear; most of the trade tracked by the report arrived in the U.S. prior to the April 2025 "Liberation Day" tariffs, and there was added uncertainty following the U.S. Supreme Court ruling that Trump had exceeded his authority in imposing the initial tariffs.
"This turbulence means that policymakers are forced to focus on the urgent, on the shocks that arrive - weekly, if not daily," she said, adding it drained countries' abilities to tackle larger problems, such as the demographics "time bomb" and other factors threatening standards of living.
She also said that the "emergency mode" due to the ongoing war in Ukraine, and subsequent increases in defense spending, could drain money from other government priorities and said the ultimate impact would hinge on whether they spend that money on one-off equipment purchases or on infrastructure such as roads and hospitals that could also aid the economy.
The poly-crises, she said, emphasize the need for leaders to ensure that public investments are focused on projects that can drive economic growth.
"Global uncertainty turbulence is likely to persist, and...it's going to be a force detrimental to private investment, and that's why I have been stressing the role of public investment," Javorcik said.
(Reporting by Libby George; Editing by Toby Chopra)
