Difficult international environment and geopolitical risks are persistent, but despite the energy price shock from the Iran war, most of the Central, East and Southeast Europe (CESEE) economies continue to show resiliency, albeit the growth is slowing down.
The recently published Spring Forecast Report 2026 of the The Vienna Institute for International Economic Studies (wiiw) shows that the CESEE region is still expected to outperform Western Europe growing over twice as fast as the euro area (0.9% in 2026 | 1.1% in 2027), even when the external environment has deteriorated sharply :
- EU members in CEE: +2.3% in 2026 | +2.3% in 2027
- Western Balkans: +2.5% | +3.1%
- Türkiye: +3.7% | +4.1%
- Ukraine & Moldova: +1.0% | +2.5%
Inflation is back in the region, mainly as a consequence of the energy price shock. Even though Europe is more diversified in terms of energy supply than in 2022, inflation across CESEE is likely to rise further into late 2026, as pass-through effects of sharply increased oil prices show up delayed in food prices and utility bills. ‘For the time being, the impact of the Iran war on EU member states in Eastern Europe remains manageable. However, rising inflation, lower export demand, disrupted supply chains and a further decline in direct investment could have a severe impact,’ says Richard Grieveson, Deputy Director of wiiw and lead author of the spring forecast.
The CESEE convergence story remains intact, but with major divergences - Poland and Southeast Europe continue to be among stronger performers. Not only due to demographics, but now also due to geopolitics, the growth model in the region is changing as well – for the first time since the early 1990s, defense is higher as a share of GDP than FDI inflows. Politics and governance are gaining more importance as well, with access to EU funds, credible defense procurement, legal predictability and the ability to direct resources toward productivity-enhancing investment becoming competitive advantages.
Read the full analysis here.
