Prospects for Eastern Europe in 2027

详细摘要

Regional countries will struggle with the energy-supply shock, domestic political turbulence and intensified hybrid war Eastern European economies have showcased surprising…

Regional countries will struggle with the energy-supply shock, domestic political turbulence and intensified hybrid war

Eastern European economies have showcased surprising strength in the face of the energy supply shock caused by the Iran war this year, with growth continuing to outpace the EU average.

At the same time, rapid fiscal expansion and rising price levels pose formidable challenges to governments across the region. Meanwhile, next year will see two closely contested elections in Poland and Slovakia.

Governments across the region next year will struggle to sustain domestic demand, contain inflation and reconcile fiscal control with rising spending needs, particularly in the area of defense. Polish, Slovak and Estonian incumbents are all imperiled in their respective elections next year, with the outcome of the first two likely to have wider foreign-policy implications. Having intensified this year, suspected Russian hybrid warfare — particularly in the Black Sea area — is set to continue in 2027.

In 2026, energy-import-reliant eastern EU was hit by the energy shock driven by the ongoing Iran war. Yet the region’s economies have proved resilient.

Every country, except Slovakia and Romania, is firmly on track to grow faster than the EU average this year, with Poland leading the pack with 3.4% GDP growth. The region is expected to outpace the EU average next year as well on the back of strong household consumption, though slowing wage growth and higher inflation could constrain household purchasing power.

The global supply shock has propelled inflation upwards across most of the region, with heavily exposed essentials such as food, fuels and electricity constituting a large share of regional household budgets and consumer price baskets. As a result, average annual inflation rates are set to exceed the EU average this year, with Romania’s projected 8.2% rate likely to be the bloc’s highest.

The IMF expects inflation rates to stabilize next year across the region at…

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