Against all odds
Most of Central and Eastern Europe has shrugged off the Iran war’s energy shock, though Ukraine and Russia have not. The energy price shock triggered by the Iran war, and plenty of geopolitical turmoil besides, has done less damage to the economies of Central, East and Southeast Europe than might have been feared. That is […] Against all odds was originally published on Emerging Europe .
Most of Central and Eastern Europe has largely escaped the energy shock caused by the Iran war, unlike Ukraine and Russia. According to the Vienna Institute for International Economic Studies (wiiw), the energy price shock and geopolitical turmoil have had less of an impact on the region's economies than initially feared. However, the growth picture varies significantly from country to country.
Romania and Slovakia are dealing with large budget deficits and a struggling German car industry, while Poland, Kazakhstan, and the Western Balkans are experiencing economic growth. Since the war began five years ago, neither Russia nor Ukraine have shown much economic growth. The eastern EU members are transitioning from low-cost manufacturing hubs to higher-value products, services, strong private consumption, and public investment.
Poland and Czechia, in particular, are benefiting from their investment in technology and productivity. The region's growth is unlikely to benefit as much from Germany's sluggish recovery, which is now driven by defense and infrastructure spending rather than traditional industries. The EU's trade dispute with China could provide some relief to the region's industries, particularly carmakers, but may also make it harder for them to import goods from China.
Overall, wiiw expects eastern EU members to grow by an average of 2.2% in 2026, unchanged from its previous forecast, and by 2.5% in 2027, a slight increase of 0.1 percentage point. This growth rate is more than double the euro area's projected growth in both years. Romania is an exception, as strict fiscal austerity is expected to push the country into a mild recession in 2026, with a 0.4% decrease in output.
Poland, Hungary, and the Western Balkan economies are expected to lead the region's growth, with Poland experiencing the highest growth rates. Ukraine's future remains uncertain, with wiiw cutting its growth forecast for 2026 to just 0.6%, down 0.4 percentage points from its summer estimate. The institute expects a slight 2.1% growth in 2027, but only if Ukraine receives adequate financial and military support from abroad, which is becoming increasingly uncertain.
Russia, the aggressor, is also feeling the economic consequences of its invasion, with wiiw forecasting meager growth of 0.6% in 2026 and a modest recovery to 1.3% in 2027.
Written by urgent.news from Emerging Europe's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
