Monthly Report No. 03/2026

Editorial insight Illiberal economics - The structural contradictions of Hungary's developmental model by Mario Holzner The ‘illiberal’ economic policies pursued by the Orbán government over the past 16 years were designed to foster a self-reliant domestic capitalist class and insulate the nation from Western volatility. Instead, they have introduced structural vulnerabilities that allow for weak short-run crisis-response capabilities and may hinder Hungary’s long-term regional standing. Chart of the month Windfall gain to Russia from the war in Iran by Vasily Astrov Thanks to skyrocketing global oil prices and the narrowing discount on Russian oil, the war in Iran has provided the Russian government with an expected bonanza. Its size will depend on how long the conflict lasts and how long oil prices stay at their current high level. Macro snapshot EU-CEE continues to outperform Germany, thanks to the resilience of domestic demand by Nadya Heger With the exception of Romania, all EU-CEE economies outperformed Germany in Q4 2025, suggesting a degree of resilience to global demand fluctuations and unfavourable external conditions. Focus of the month What the war in the Middle East means for CESEE by Richard Grieveson Despite soaring energy prices and rising risk premia on CESEE sovereign bonds, there is good reason to be cautious about drawing too close a parallel with 2022, when Russia launched its war on Ukraine. Back then, the energy price shock coincided with global supply shortages and pandemic-era fiscal stimulus still working through the system. That combination is not present today. Research in brief Elimination of remaining trade barriers with the EU could push up Turkish exports by 6% Client Austrian Federal Ministry of Economy, Energy and Tourism by Meryem Gökten Despite rising trade volumes following the creation of a Customs Union between Turkey and the EU, over the past 15 years the EU and Austria have gradually lost market share in Turkey, while Russia and China have increased theirs. Pronounced shift in Ukraine’s exports towards the EU and agriculture by Olga Pindyuk Russia’s blockade of traditional Black Sea routes has forced Ukrainian exporters to seek alternative markets and logistics channels, while metallurgy – a pre-war cornerstone of Ukraine’s export economy – has suffered a sharp decline due to the destruction of production facilities. Country in focus Hungary - A chance for improving relations with the EU, finally by Ioannis Gutzianas In April, Hungary faces its most competitive election since 2010, with polls generally suggesting a win for the opposition Tisza Party. A Tisza victory would likely lead to an improvement in relations with the EU and would increase the chances of unlocking frozen EU funds – though in the absence of a constitutional supermajority, institutional constraints could limit policy implementation. By contrast, a renewed Fidesz mandate would likely reinforce the current policy trajectory and leave Hungary’s strained relationship with the EU largely unresolved.