Covestro adjusts its forecast for fiscal year 2025 as follows:

• EBITDA is expected to be between EUR 700 million and EUR 1,100 million. The previous forecast projected EBITDA between EUR 1,000 million and EUR 1,400 million. The consensus expected this figure to be EUR 931 million.

• Free operating cash flow (FOCF) is expected to be between EUR -400 million and EUR +100 million. The previous forecast projected FOCF between EUR 0 million and EUR 300 million. The consensus expected this figure to be EUR 106 million.

• Return on capital employed over weighted average cost of capital (ROCE over WACC) is expected to be between -9 and -5 percentage points. The previous forecast projected ROCE over WACC between -6 and -3 percentage points.

Unchanged, greenhouse gas emissions, measured via CO₂ equivalents, are expected to be between 4.2 million tons and 4.8 million tons.

In the second quarter of 2025, Covestro’s preliminary EBITDA amounted to EUR 270 million, which is within the previous forecast range between EUR 200 million and EUR 300 million. This was supported by the release of bonus provisions of EUR 43 million in line with the reduction of the full year forecast. The consensus expected this figure to be EUR 220 million.

The financial report for the second quarter of 2025 will be published on July 31, 2025.

Capital market expectations are based on the average values of the latest consensus estimates of financial analysts, recently published by Vara Research on July 7, 2025.

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• Growth in the EBRD regions is projected to slow, standing at 3.0 per cent in 2025
• Tariff hikes and global policy uncertainty dampen trade and stress supply chains
• Inflation picks up again, driven by strong domestic demand and loose fiscal policy

The European Bank for Reconstruction and Development (EBRD) has lowered its regional economic forecast for 2025 by 0.2 percentage points relative to its February 2025 projections. According to the Bank’s Regional Economic Prospects report, economies in which the EBRD invests are now projected to grow by an average of 3.0 per cent this year, with a modest recovery to 3.4 per cent expected in 2026.

This downward revision follows a similar 0.3 percentage point cut in February and reflects a confluence of global headwinds, as captured in the title of the new report, “Uncertain times”.

These include a sharp rise in trade and economic policy uncertainty, weaker external demand, and the direct and indirect effects of newly announced import tariff increases. As a result, most economies across the EBRD regions have seen their 2025 growth projections trimmed, with the largest downward revisions recorded in the Western Balkans, central Europe, and the Baltic states.

“Although understanding the full macroeconomic effects of the newly announced tariffs will take time, it is already clear that our regions have entered a period of heightened uncertainty and slower growth,” explained Beata Javorcik, the EBRD’s Chief Economist. “Reducing trade tensions through constructive dialogue and achieving consensus on trade policy among key stakeholders are crucial, as prolonged uncertainty carries painful economic costs.”

Ukraine’s growth forecast for this year has been revised downwards by 0.2 percentage points to 3.3 per cent, due to weaker European Union (EU) demand and continued damage to energy infrastructure from Russian attacks.

The United States of America’s recent round of tariff increases (up to mid-April) – including 25 per cent tariffs on steel, aluminium and cars, and a 10 per cent rise in blanket tariffs across broader categories – is expected to have significant global repercussions, including for the EBRD regions. The analysis indicates that the average effective US tariff on imports from the Bank’s regions is estimated to surge from 1.8 per cent in 2024 to 10.5 per cent, assuming unchanged composition of exports.

Among the EBRD economies, the Slovak Republic is expected to take the largest direct gross domestic product (GDP) hit from US tariff increases (0.8 per cent), followed by Jordan (0.6 per cent) and Hungary (0.4 per cent). In the Slovak Republic and Hungary, tariffs on cars alone account for a substantial share of the output losses – 83 per cent and 41 per cent, respectively.

Beyond direct effects, the report warns of broader risks to global supply chains. Even economies with limited direct exposure to the US market could be affected, as heightened trade policy uncertainty disrupts supply networks. While China’s trade role in the EBRD regions is growing, especially as a source of imports, Germany remains the top export destination for many EBRD economies, and Europe’s economic performance still heavily shapes the Bank’s regional outlook.

At the same time, the impact of higher US tariffs could be partially offset by trade diversion, with economies that are facing lower tariff rates than their competitors – particularly China – potentially gaining market share in the US.

Inflation in the EBRD regions is showing a concerning reversal, according to the report. After peaking at 17.5 per cent in late 2022 and falling to 5.3 per cent in September 2024, average inflation accelerated again to 6.1 per cent as of February 2025. Inflationary pressures are now predominantly demand-driven, reflecting loose fiscal policies and strong nominal wage growth.

Despite mounting fiscal pressures, average debt in the EBRD regions is expected to remain broadly stable at around 52 per cent of GDP over the next four years. However, this stability assumes governments will implement stringent fiscal measures, including cuts in some areas of expenditure amid expected higher spending on defence, industrial policies and interest payments.

The report also warns that growing reliance on bond issuances in the EBRD regions, at the expense of concessional borrowing, leaves lower-income economies more vulnerable to market volatility and policy uncertainty.

Heightened geopolitical tensions have led many EBRD economies to ramp up their defence spending. Between 2014 and 2023, defence expenditure across the Bank’s regions nearly doubled – from 1.8 per cent of GDP to around 3.5 per cent. The report notes that the regions’ arms exports have risen from 0.05 per cent of GDP in 2019 to 0.09 per cent in 2024, with Bosnia and Herzegovina, the Slovak Republic, Czechia and Poland now registering the highest export levels. 

The report examines how increased defence spending, coupled with domestic sourcing, could significantly boost output. The analysis finds that growing demand for defence-related products could raise GDP in the Slovak Republic, Greece, Croatia and Hungary by 1.0 to 1.5 per cent.

Regional growth projections

Growth in central Europe and the Baltic states is projected at 2.4 per cent in 2025 and 2.7 per cent in 2026. Both figures have been revised downwards from earlier forecasts due to the impact of new tariffs, weaker external demand – particularly from Germany – and increased global policy uncertainty.

In the south-eastern EU economies, following sluggish growth of 1.6 per cent in 2024, a modest recovery to 2.0 per cent is expected in 2025 – lower than previously forecast – before growth picks up to 2.4 per cent in 2026. The outlook for Bulgaria is slightly more upbeat owing to resilient domestic demand.

Growth in the Western Balkans is forecast to slow from 3.6 per cent in 2024 to 3.2 per cent in 2025, then tick up to 3.4 per cent in 2026. Political instability in Serbia and spillovers from slower growth in advanced European economies are weighing on the region’s outlook.

Central Asia is expected to see growth moderate slightly from 5.6 per cent in 2024 to 5.5 per cent in 2025 and 5.2 per cent in 2026. Lower commodity prices have prompted downward revisions for Kazakhstan and Mongolia.

In eastern Europe and the Caucasus, growth is expected to continue to ease to 3.5 per cent in 2025 before rebounding to 4.3 per cent in 2026. The economic outlook for Moldova and Ukraine has been revised downwards, reflecting weaker EU demand and continued damage to Ukraine’s energy infrastructure.

Growth in Türkiye slowed to 3.2 per cent in 2024 amid tighter monetary policy. It is expected to decelerate further to 2.8 per cent in 2025 before rising to 3.5 per cent in 2026. The 2025 forecast was cut due to tighter-than-expected monetary policy and lower domestic and external demand.

The southern and eastern Mediterranean region is expected to see growth pick up to 3.6 per cent in 2025 and 3.9 per cent in 2026. However, these projections have been revised downwards relative to the February 2025 outlook, reflecting ongoing conflicts and high global policy uncertainty.

Source: Eurostat for EU economies, national authorities, and the EBRD.
Note: Weights are based on the values of GDP in 2022 at market exchange rates. The table also includes forecasts for Belarus and Russia, notwithstanding the fact that Belarus and Russia have had their access to Bank resources suspended under Article 8.3 of the Agreement Establishing the EBRD.

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