Central and Eastern Europe’s growth map

This article is a part of Poland Unpacked. Weekly intelligence for decision-makers

First-quarter 2026 GDP data are now available for four economies in the region. Lithuania posted the strongest growth, at 2.5% year on year (seasonally adjusted data). Czechia recorded growth of 2.1%, Lithuania 1.7%, while Estonia came in at 1.3%.

Looking at the 2025 growth data, several conclusions emerge. The first is something the region has already grown used to: Poland remains the fastest-growing economy in Central and Eastern Europe. In the fourth quarter of last year, economic growth reached 3.9% year on year. Three other economies expanded at a similar pace – Croatia (3.6%) and Lithuania (3.3%). Bulgaria recorded slightly weaker growth, at 3%.

The second conclusion is that all economies – with the exception of Romania – are growing. What is more, growth is accelerating. In nine of the 11 countries analyzed, growth in the final quarter of 2025 outpaced the full-year rate. The opposite was true only in Bulgaria and the aforementioned Romania. Romania’s recession is largely the result of rapid fiscal consolidation. The general government deficit narrowed from 9.3% of GDP in 2024 to 7.9% in 2025. This was achieved mainly through higher taxes, including VAT and excise duties. The result was higher inflation, which further dampened consumer spending.

The third conclusion is that the line-up of regional outperformers and laggards is beginning to shift. Lithuania, Czechia and Latvia have moved closer to the group of growth leaders. In recent years, these economies struggled to gain momentum. There are also signs of improvement in Hungary. It is still too early to speak of a clear-cut recovery. However, Péter Magyar’s election victory creates a strong possibility that EU funds will be unlocked and investment inflows into the Hungarian economy will increase.

Aside from Romania, the sharpest deterioration has been seen in Slovakia. Growth there had already been underwhelming in previous years, averaging just above 2% annually in 2023–24. The Slovak economy is now expanding at less than 1% a year.

Twin deficits

A useful insight into the state of regional economies comes from comparing the fiscal balance with the current-account balance. The first indicator shows how much the government borrows relative to GDP. The second reflects how much the economy borrows from abroad relative to GDP (a negative balance), or how much it lends abroad (a positive balance) – for the economy as a whole, including both the public and private sectors. The chart below presents the average levels of these two indicators between 2023 and 2025.

Romania recorded by far the largest fiscal and current-account deficits. On average, both stood at close to 8% of GDP. The Romanian economy was therefore running so-called twin deficits. The budget deficit was financed through foreign borrowing. Hungary and Slovakia also posted sizable deficits on both measures. In Hungary, the fiscal deficit averaged 5.6% of GDP, while the current-account deficit stood at 3%. In Slovakia, the figures were 5% and 3.8%, respectively.

Poland, too, continues to run a high fiscal deficit, but this is accompanied by a balanced current account. In other words, while the government is borrowing heavily, the economy as a whole is not increasing its liabilities to foreign creditors. As a result, despite the very large fiscal deficit, Poland’s macroeconomic position is considerably more stable than that of countries such as Romania.

Overall, the region still appears to be pursuing broadly prudent fiscal policies. In most countries, budget deficits remain below 3% of GDP, which in turn helps contain current-account deficits, with some economies even posting surpluses. To some extent, this discipline is enforced by eurozone membership. A large fiscal deficit could boost growth in the short term, but it would also fuel inflation, driving up labor costs and eroding competitiveness.

What comes next?

This year is likely to prove somewhat weaker for most economies in the region than the previous one. The main reason is the energy shock triggered by the war in the Middle East. In mid-April, the International Monetary Fund (IMF) projected that GDP growth in 2026 would slow relative to 2025 in as many as seven countries. Poland was among them, with growth expected to ease from 3.6% to 3.3%. Hungary, Slovenia, Estonia and Latvia, by contrast, are forecast to post stronger growth than last year. Inflation is also expected to rise.

It is worth remembering that IMF forecasts tend to underestimate growth in some economies. Poland is a case in point: the IMF has frequently projected lower growth than the country ultimately delivered. On the other hand, the broader scenario for energy prices remains relatively optimistic.

Poland remains the regional growth leader. Poland continues to post the highest growth rate in Central and Eastern Europe (3.9% year on year in the fourth quarter of 2025), although an acceleration is visible across most economies. In nine out of 11 countries, growth at the end of the year was higher than the average for 2025.
Shifts in leadership and the role of imbalances. New growth leaders are emerging, including Lithuania (2.5% year on year in Q1 2026) and Czechia (2.1%), while Romania is clearly weakening. At the same time, Romania stands out as the economy with the largest macroeconomic imbalances. Both the fiscal deficit and the current-account deficit are running at around 8% of GDP.
2026 likely to bring a mild slowdown. The IMF forecasts a slowdown in Poland’s growth from 3.6% to 3.3%, alongside weaker dynamics in most of the region (seven countries). This is likely to reflect higher energy prices following the war in the Middle East.