Monthly Report No. 7-8/2025

Summer Forecast Update Resilience tested by yet another external shock Economic Forecasts for Eastern Europe for 2025-27 The summer 2025 economic outlook for Central, East and Southeast Europe (CESEE) remains broadly resilient, despite yet another external shock – the outbreak of conflict between Israel and Iran. While the potential for oil price spikes and global growth slowdowns exists, the region has consistently demonstrated strength in the midst of crisis, from the COVID-19 pandemic to the war in Ukraine. CESEE is forecast to grow faster than the euro area, helped along by domestic demand, strong real wage growth and robust investment. However, fiscal pressures are mounting, especially in those EU-CEE countries with a high deficit and looming consolidation needs. Political instability, both domestically and globally, adds to the risk, while the long-term outlook hinges on German industrial recovery, the evolution of global trade dynamics and the trajectory of US foreign policy. Global outlook War in the Middle East will have limited fallout for CESEE by Richard Grieveson Regional outlook Downward revisions, but still resilient; fiscal challenges looming by Richard Grieveson Country updates Albania FDI inflows and tourism remain key to sustaining growth momentum by Isilda Mara Belarus Authorities struggle to counter slowdown in growth by Dzmitry Kruk Bosnia and Herzegovina Modest economic growth amidst sticky inflation by Selena Duraković Bulgaria Euro adoption now well on track by Emilia Penkova-Pearson Croatia Growth momentum slows amid global and domestic headwinds by Bernd Christoph Ströhm Czechia Guarded optimism in uncertain times by Ioannis Gutzianas Estonia Acceleration in growth ahead, amid challenges by Maryna Tverdostup Hungary So far from a ‘flying start’ – the stumbling continues by Sándor Richter Kazakhstan Resilient to external and domestic headwinds by Alexandra Bykova Kosovo Solid growth, despite delayed government formation by Isilda Mara Latvia Revival in a time of rising insecurity by Sebastian Leitner Lithuania Defence expenditure helping to maintain a high rate of growth by Sebastian Leitner Moldova Stagnation ahead by Gábor Hunya Montenegro Downturn in tourism threatens fragile growth by Marko Sošić North Macedonia Better than expected, but still far from good by Branimir Jovanović Poland Growth holds steady by Maciej Grodzicki Romania New government to implement austerity measures by Gábor Hunya Russia Tight monetary policy taking its toll on the real economy by Vasily Astrov Serbia The slow turn of the tide by Branimir Jovanović Slovakia Uncertainty weighing on growth prospects by Doris Hanzl-Weiss Slovenia Early signs point to a year of lacklustre growth by Niko Korpar Turkey Weakening economic activity and deepening political unrest by Meryem Gökten Ukraine Facing increasing headwinds by Olga Pindyuk