Against all odds

A recent autumn forecast by the Vienna Institute for International Economic Studies (wiiw) suggests that most of Central and Eastern Europe has shrugged off the energy shock triggered by the Iran conflict, though Ukraine and Russia have not. The analysis indicates that the economic damage to the region is less severe than previously feared. However, the economic picture across Europe remains highly varied by country.

While some nations, like Romania and Slovakia, face challenges such as budget deficits and weakness in the German automotive sector, others, including Poland, Kazakhstan, and the Western Balkans, are experiencing significant growth. The eastern members of the European Union are undergoing a fundamental structural change. Their traditional role as low-cost manufacturing hubs is evolving toward higher-value products, services, and increased public investment.

Experts point to countries investing in technology and productivity, like Poland, which has seen its high-tech industry grow substantially over the past decade. Future growth is increasingly driven by defense and infrastructure spending, rather than solely by the carmaking sector. wiiw expects the eastern EU members to grow by an average of 2.2% in 2026 and 2.5% in 2027.

This rate is expected to significantly outpace the Euro Area average. Poland is projected to lead this growth, while the Western Balkan economies are set for robust expansion. In stark contrast, Ukraine’s economic position is deteriorating, with the institute cutting its 2026 growth forecast to 0.6%.

Russia’s ongoing military actions and the resulting destruction of infrastructure are taking a heavy toll. Meanwhile, the aggressor state, Russia, is also increasingly feeling the economic consequences of its invasion. These findings highlight that while the region has shown resilience, navigating the geopolitical landscape requires constant adaptation and investment against mounting global pressures.

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