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Forecasts for the Region's Economies

Although the economies of Central and Eastern Europe are rapidly converging with the West, this process has been far from smooth, particularly in recent years. Following the pandemic and Russia's attack on Ukraine, new obstacles of a geopolitical nature are emerging.

Publikacja: 03.09.2025 03:59

As is tradition, the presentation of the report by the Warsaw School of Economics and the Economic Forum opened the event in Karpacz. The forum is scheduled to run until Thursday.

Foto: Maciej Zygmunt

Piotr Skwirowski

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Discussions at the 34th Economic Forum in Karpacz began with the presentation of the 8th edition of a report by the Warsaw School of Economics (SGH) and the Economic Forum, a collaborative project involving over 60 experts.

‘The report consists of 11 studies analysing the socio-economic situation in Central and Eastern Europe. SGH experts examined and described the region in terms of new international economic relations, the impact of energy transition on the economic growth of individual countries, the investment climate and economic situation, fiscal policy challenges in times of armed conflict, health care policy, as well as economic development and growth in a patchwork model of capitalism in the coming decade,’ write Piotr Wachowiak, Rector of SGH and a professor at the university, and Zygmunt Berdychowski, Chairman of the Programme Council of the Economic Forum, in the report’s introduction.

Experts from the Warsaw School of Economics report that, between 2004 and 2024, the 11 countries in the region recorded average economic growth nearly three times that of the “old” EU and proved most resilient to the shocks of the pandemic and the war in Ukraine. Poland experienced the fastest growth among the group, with an average annual GDP growth rate at fixed prices of 3.8 per cent.

After 21 years of EU membership, the Central and Eastern European countries have narrowed the gap with the EU-15 “core” countries’ average GDP per capita by more than 31 percentage points: convergence was quickest in 2004-2024 in Romania (45 percentage points) and Lithuania (40 percentage points), followed by Bulgaria (33 percentage points) and Poland (30.5 percentage points), and slowest (below 20 percentage points) in Slovenia, the Czech Republic and Hungary.

The authors of the report also presented several forecasts for 2035. In the positive scenario, within a decade, GDP per capita in the countries of the region would exceed the per capita income level of Western Europe (EU-15) by 2 per cent, with Poland closing its historical income gap with the West by 2035, achieving a GDP per capita at the EU-15 average. In the baseline scenario only Lithuania would outpace the EU-15 over the next decade; Poland’s gap with the EU-15 would narrow by about 15 percentage points but remain significant in 2035, still exceeding 10 per cent. In the cautionary scenario, the 11 countries would see a reversal of the current trends, leaving the average income gap in 2035 about one percentage point higher than in 2024, with only Poland, Lithuania and Slovakia avoiding an income gap.

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A crucial section of the report is the chapter on the economic situation in Central and Eastern Europe. It notes that the region's countries took an average of 7.7 quarters to restore their consumption levels after the pandemic. Poland achieved this the quickest, in just five quarters. However, the economic landscape in these countries was quite varied in 2024.

Most economies maintained the upward trend that started in early 2023, following the subsidence of shocks from Russia's invasion of Ukraine and the fallout from international trade sanctions imposed on Russia and Belarus by the EU and the US, among others. Yet, in countries nations (Croatia, Latvia, Romania, Serbia, Slovakia, Slovenia, and Hungary), the 2023 recovery came to a halt with the arrival of 2024, as a downturn in the economic cycle began or even took hold.

Experts from the Warsaw School of Economics observe that in almost all countries in the region, household consumption grew last year, mirroring increases in income and a decline in inflation. Nevertheless, the fourth quarter showed signs of this upward trend reversing in most countries. According to the report's authors, this was likely caused by deteriorating household sentiment, probably due to an unclear economic outlook largely shaped by political events and uncertainty surrounding economic policy responses.

This uncertainty particularly relates to the new US administration's geopolitical strategy, which has far-reaching global consequences. The report states, ‘The trade conflict triggered by Donald Trump, and even more so the uncertainty about the direction of his trade and military policy, the response of global economic leaders to it, and the impact of these factors on international trade, the production strategies of transnational corporations and capital allocation, have been and continue to be a serious burden on the global economy’.

In another section of the report, SGH experts detail their research into the challenges of fiscal policy for Central and Eastern European countries during armed conflicts. A comparison of defence spending reveals that in 2023 it constituted 2.5-7.2% of total public spending in most countries in the region. The Baltic states had the highest share, averaging approximately 6.8% of PKB. Poland's spending was slightly higher at 4.4% of GDP, exceeding the regional average of 4.3% of GDP.