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KDI 경제교육·정보센터

Economic Information and Education Center

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Europe and Central Asia Economic Update, April 2026: Industrial Policy

The resilience of the countries of Europe and Central Asia is tested again by the crisis in the Middle East and rising energy import prices. Growth in the region is likely to weaken to 2.2 percent on average in 2026-27 from 2.6 percent in 2025. The pace of economic expansion in the Russian Federation is expected to ease amid reduced fiscal support and structural constraints. Growth in T？rkiye is likely to drop to 2.8 percent this year because of higher energy and food prices, before firming to 3.7 percent in 2027. Risks to the outlook are substantial. A more protracted and intense conflict in the Middle East could severely disrupt global energy flows, pushing oil, natural gas, and fertilizer prices higher and leading to much weaker growth and higher inflation. Growth in the euro area could falter, especially if global trade tensions escalate. Industrial policy interventions in ECA have surged since 2020. After an initial increase to cover pandemic relief, the focus has shifted toward economic development, energy efficiency, food and supply chain resilience, critical minerals, and national security. Domestic subsidies and nontariff measures account for most of ECA’s industrial policies; import tariffs are rarely used. Although resorting to industrial policies may be tempting in times of weaker productivity growth, policymakers should use them sparingly to address specific market failures while preserving competition, not as the main engine for development. The priority for governments needs to be the modernization of institutions, business environments, and educational systems to support productivity gains and job creation. If justified, industrial policies should focus on providing tailored public inputs and prioritize new firms or ideas, rather than protect existing sectors or incumbents.

World Bank 2026.04.13