WIIW The Vienna Institute for International Economic Studies - Wiener Institut für Internationale Wirtschaftsvergleiche

Vasily Astrov, Alexandra Bykova, Selena Duraković, Meryem Gökten, Richard Grieveson, Ioannis Gutzianas, Doris Hanzl-Weiss, Gabor Hunya, Branimir Jovanović, Biljana Jovanovikj, Niko Korpar, Dzmitry Kruk, Isilda Mara, Michał Możdżeń, Emilia Penkova-Pearson, Olga Pindyuk, Sandor Richter, Marko Sošić, Bernd Christoph Ströhm and Marina Tverdostup

wiiw Forecast Report No. Spring 2026, April 2026
141 pages including 30 Tables and 58 Figures

Executive summary
by Richard Grieveson
free download

Global assumptions
by Biljana Jovanovikj and Olga Pindyuk
A renewed Middle East energy shock has stalled the euro-area recovery, pushing growth down and inflation back up amid rising uncertainty and supply disruptions.

CESEE overview
by Richard Grieveson
CESEE is still outperforming the euro area, but faces rising inflation, widening divergence and a structural shift away from its old growth model, driven by labour shortages and geopolitics.

ALBANIA: Resilience and opportunities amid external shocks
by Isilda Mara
GDP growth in 2026 is expected to slow slightly, to 3.6%, reflecting higher import costs and rising uncertainty. Domestic demand will remain the main engine of activity, supported by household and government spending, with tourism continuing to add momentum. External shocks pose a risk and may lift inflation through import prices. The rapid expansion of solar power will help reduce reliance on hydropower and soften the impact of global energy‑price swings, offering partial protection against external volatility.

BELARUS: Growth weakens as external volatility dominates
by Dzmitry Kruk
GDP growth slowed markedly in H2 2025 and even turned slightly negative in early 2026. This reflects a turbulent external environment, which has also affected domestic demand. Although the latter continued to provide support, its capacity to offset external shocks weakened. The authorities appear to be gradually accepting lower growth, while becoming more tolerant of elevated inflation. We expect growth to decelerate further in 2026 and to remain fragile in 2027-2028, with outlook increasingly dependent on uncertain export dynamics.

BOSNIA AND HERZEGOVINA: Delayed recovery amid external vulnerabilities and persistent political uncertainty
by Selena Duraković
Following modest growth in 2025, further recovery is expected to be delayed due to the new war in the Middle East. Household consumption is still expected to grow, supported by rising wages, including a significant minimum wage increase in January. However, external imbalances are projected to persist, despite continued support from remittances and tourism. Inflation is expected to increase owing to energy price developments, which pose a major risk of an uptick in inflation. Overall, the outlook is constrained by weak external demand, structural rigidities and ongoing political uncertainty that continues to weigh on investment and reform momentum.

BULGARIA: Smooth euro adoption
by Emilia Penkova-Pearson
Last year, economic growth reached 3.1%, supported by higher disposable income and increased household consumption, although manufacturing and exports posted declines. However, we expect economic growth to slow over the forecast period and inflation to remain elevated, owing to the current energy price shock. The country’s transition to the euro has proceeded smoothly. Former president Rumen Radev emerged as the clear winner of the parliamentary election held on 19 April 2026.

CROATIA: A resilient macroeconomic outlook, but uncertainty looming
by Bernd Christoph Ströhm
Economic growth is expected to gradually moderate to below 3% over the forecast horizon, as the growth in private consumption weakens somewhat. Despite this, the country will likely remain one of the stronger performers within the euro area. Geopolitical factors, such as the conflict in the Middle East, will continue to be a key downside risk. The inflation forecast is now also subject to increased uncertainty because of the energy price shock, which could translate into second-round effects if the war in Iran drags on.

CZECHIA: Industrial recovery amid rising uncertainty
by Ioannis Gutzianas
The Czech economy grew solidly in 2025, supported by strong household consumption and a recovery in investment, while external demand also contributed positively. Industrial activity has continued to improve in early 2026, although the recovery remains uneven and is closely tied to developments in European manufacturing. Rising geopolitical tensions and energy price risks are raising the uncertainty, while monetary policy remains on hold and fiscal policy is turning more expansionary. Growth is projected to be 2.2% in 2026.

ESTONIA: Income tax cuts driving the recovery, but the risks are mounting
by Marina Tverdostup
After three years of recession and near-stagnation, the Estonian economy grew by 0.6% in 2025. Growth is projected to accelerate to 2.3% in 2026, supported by a strongly expansionary fiscal stance, improving external demand and a rebound in household spending; that will be followed by 2.8% in 2027 and 2.4% in 2028. Private consumption is set to become the main engine of growth, underpinned by the recently adopted income tax reform and lower inflation. However, an expanding fiscal deficit and persistent competitiveness challenges are clouding the medium-term outlook.

HUNGARY: Will economic growth resume after the fall of the Orbán regime?
by Sandor Richter
Hungary’s economy has remained largely stagnant since mid-2022. Factors such as an economic policy aligned with the election cycles, legal uncertainties, the excessive centralisation of decision making and an overall lack of transparency, plus corruption and strained relations with the EU have all weighed on investment and productivity. The Tisza party’s landslide election victory opens up an ambitious and EU-oriented reform agenda; nevertheless, its implementation may encounter fiscal constraints.

KAZAKHSTAN: Oil production strains putting a cap on growth
by Alexandra Bykova
Economic growth peaked in 2025 and is expected to slow in 2026 amidst recent oil production disruptions and weaker growth of investment and private consumption. Nevertheless, high global oil prices will support budget revenues, strengthen the tenge and reduce the current account deficit. Double-digit inflation requires tight monetary policy and limits the scope for fiscal stimulus. Medium-term growth is likely to accelerate to 5% by 2028, but the outlook remains highly uncertain, given the geopolitical risks associated with oil prices and the transportation routes for oil exports.

KOSOVO: Solid growth ahead, despite the political instability
by Isilda Mara
Economic growth in Kosovo remained solid in 2025, though structural vulnerabilities persist. The economy continues to be heavily dependent on imports and external financing, with gains in services exports, remittances, and FDI insufficient to offset the widening goods trade deficit. Growth is projected to be 3.4% in 2026 (slightly below earlier expectations), before rising to around 3.6% in 2027-2028, driven mainly by consumption and investment. The key challenges that remain are the deteriorating current account and the continued exposure to energy price volatility. The lifting of EU restrictive measures on Kosovo in January 2026 is a positive development, likely to support investment and confidence.

LATVIA: Investment-driven growth facing external headwinds
by Ioannis Gutzianas
Latvia’s economy is set to grow moderately in the coming years, supported primarily by strong public investment and improving domestic demand, though external conditions remain fragile. Inflation is expected to stay relatively elevated, driven by robust wage growth, and uncertainty remains high on account of the geopolitical tensions. While investment will continue to underpin growth, weak external demand and structural challenges in key sectors are likely to preclude more robust growth.

LITHUANIA: Domestic demand sustaining growth as external conditions worsen
by Ioannis Gutzianas
Lithuania’s economy is continuing to expand at a healthy pace, supported primarily by domestic demand, though growth is becoming increasingly uneven. While investment and – to a lesser extent – consumption are sustaining economic activity, poorer external conditions and rising geopolitical uncertainty are having an impact on the outlook. As a result, the growth forecast for 2026 has been revised.

MOLDOVA: Investment-led growth amid energy risks and structural constraints
by Gabor Hunya
Growth is expected to remain moderate this year (1.7%), supported by donor-financed investment and EU-oriented reforms, but it is constrained by weak manufacturing performance and labour shortages. Inflation may rise again in H1 2026 due to higher energy prices, limiting monetary easing. Fiscal and external deficits will stay elevated but financed externally. Adverse risks stem from energy supply, weather and regional tensions, while stronger export capacity and energy independence are key to any medium-term improvement.

MONTENEGRO: Race to close the EU accession negotiations in 2026
by Marko Sošić
Montenegro entered 2026 with inflation easing and growth set to remain a little above 3% over the medium term, but the overall picture is less reassuring than the headline numbers would suggest. The new Middle Eastern war and the oil-price shock it has triggered have significantly worsened the external environment. Exports remain weak, industrial output performed very poorly in 2025, and fiscal pressures are building ahead of large debt repayments. The continuation of the Bar–Boljare highway could support investment, but growing reliance on special intergovernmental arrangements for major projects adds a new layer of policy and governance risk.

NORTH MACEDONIA: Yet another crisis finds the country unprepared
by Branimir Jovanović
Despite ending 2025 on a solid footing, the outlook at the start of 2026 has worsened substantially, with industrial production and exports falling deep into negative territory. The war in the Middle East will make things worse, fuelling inflation, eroding real incomes, slowing consumption and investment, and further weakening the already sharply reduced foreign direct investment. The only positive signal comes from revived domestic investment in infrastructure, but that is unlikely to prevent a slowdown in growth. We have therefore revised our GDP growth forecast for 2026 downward to 2.9% and have raised our inflation forecast to 5.0%, with the possibility of the outcomes being even worse.

POLAND: Solid growth, but inflationary risks on the rise
by Michał Możdżeń
Poland’s economy continues to grow solidly, supported by resilient domestic demand, lower interest rates and EU-funded investment. However, the latest escalation in the Middle East has sharply increased the risk of a new import cost shock through higher energy prices, although Poland enters this period with a relatively favourable external position. Fiscal policy is likely to remain expansionary, driven by high defence spending and measures to cushion the rising cost of living. GDP growth is still projected to be 3.6% in 2026, but the balance of risk has shifted towards somewhat lower growth and higher inflation.

ROMANIA: Suffering from stagflation
by Gabor Hunya
Romania’s economy remained weak in 2025, with GDP growth of just 0.7%, as fiscal tightening and high inflation curbed consumption, leaving investment as the main driver. Conditions worsened in early 2026 amid falling industrial output, declining confidence and rising unemployment. Inflation remains elevated, despite stable exchange rates. Fiscal consolidation continues to weigh on demand, while external imbalances are slowly improving. A modest recovery is expected in late 2026, but risks from energy prices, weak competitiveness and political fragility persist.

RUSSIA: The spike in energy prices will not solve all problems
by Vasily Astrov
The windfall from high energy prices in the wake of the war in the Middle East has provided timely relief for the ailing government budget. It is also expected to have a moderately positive effect on economic growth, which turned negative at the beginning of 2026. In the baseline scenario, real GDP is forecast to grow by 0.9% this year, followed by an acceleration in 2027-2028 on the back of expected monetary policy easing. If global energy prices stay elevated for a long time or rise further, GDP growth will be higher, although inflation will speed up as well.

SERBIA: External shocks derail chances of recovery
by Branimir Jovanović
The positive signals seen at the start of 2026 are likely to be short-lived. The new war in the Middle East is set to have an impact on the economy through higher energy prices, rising costs for business and weaker foreign direct investment. Thanks to government intervention in domestic fuel prices, the inflationary effect may be less pronounced than in some neighbouring countries, but it will still be felt. We are therefore revising our GDP growth forecast for 2026 down to 2.0% and raising our inflation forecast to 4.5%, with the risk of far worse outcomes if the war in the Middle East drags on.

SLOVAKIA: Fiscal tightening and geopolitical tensions dampening outlook
by Doris Hanzl-Weiss
After low growth in 2025, Slovak GDP will again increase only modestly this year. The wiiw forecast has been revised slightly downward and GDP is now expected to rise by just 0.5%, as ongoing fiscal consolidation continues to weigh on household consumption. In addition, external uncertainties threaten this modest expansion. The outlook is expected to improve in 2027, with a pause in fiscal tightening and the creation of export capacity at the new Volvo plant. However, consolidation could resume in 2028, leading to lower growth prospects once again.

SLOVENIA: Inconclusive result of parliamentary election will not affect the economic outlook
by Niko Korpar
Slovenia’s economic outlook is marked by moderate but resilient growth (2% in 2026), supported primarily by domestic demand; meanwhile external headwinds and structural competitiveness challenges continue to weigh on the outlook. Inflationary pressures stemming from the Iran war, alongside expansionary fiscal policy and strong wage growth, will contribute to sustained inflationary pressures. The result of the parliamentary election held in March 2026 indicates a near-even split between left- and right-leaning blocs, pointing to a potentially protracted coalition-formation process.

TURKEY: Economic outlook affected by the war in Iran
by Meryem Gökten
Turkey’s economy grew by 3.6% in 2025, driven by domestic demand, while net exports weighed on activity. As a net importer of energy, Turkey is highly exposed to the Middle Eastern conflict. In our baseline scenario – in which we assume that the conflict will end soon and that the energy price shock is only temporary – we forecast 3.7% GDP growth and 29% inflation in 2026. In the adverse scenario (in which the conflict persists and energy prices remain elevated for longer), the outlook would deteriorate significantly. Monetary policy remains tight, while exchange-rate stability is supported by foreign-exchange interventions. The improved 2025 budget balance provides some scope to absorb the higher energy costs, though rising interest payments limit fiscal support.

UKRAINE: Navigating the worsening external environment
by Olga Pindyuk
Massive missile attacks by Russia have significantly impacted Ukraine’s economic activity, as the destruction of energy-sector infrastructure has led to electricity shortages and a record increase in energy imports. The war in Iran is also having an adverse impact on the country’s economy, which is heavily reliant on imports of fuel and fertilisers. In light of these factors, we have downgraded our growth forecast for 2026-2027, and the downside external risks to the forecast have become larger.