Eastern Europe can withstand the Iran crisis economically, Ukraine is under massive pressure

The Economy in Eastern Europe remains resilient despite the energy crisis triggered by the Iran war. The Vienna Institute for International Economic Studies (wow) predicts that the EU countries there will grow by 2.3 percent in 2026 in its spring forecast published on Wednesday. This means that they will continue to outpace the Eurozone (0.9 percent). The previous regional success model of the extended workbench is fundamentally changing.

The model of Central and Eastern European countries as favorable production locations for Western industrial groups is under pressure. According to the wow-Economists see a loss of competitiveness due to sharp increases in wage costs that are not offset by corresponding increases in productivity. In addition, foreign direct investment is falling noticeably while competition from China is increasing.

This structural change is leading to a historic shift: for the first time since the early 1990s, increasing defense spending is contributing as much or even more to regional economic growth than foreign direct investment.

Russia’s economic growth at Western European levels

A differentiated picture emerges in Russia. In the country, which is subject to Western economic sanctions because of its war against Ukraine, economic growth is only at the level of Western Europe. This is expected for 2026 wow in Russia an increase of 0.9 percent, which corresponds exactly to the forecast value for the euro zone.

In 2027, Russia’s economic output is expected to grow by 1.5 percent, faster than that of the euro countries (1.1 percent). High key interest rates of 15 percent and a labor shortage are dampening the potential, but the sharp rise in oil and gas prices due to the Iran war is providing the Russian state budget with unexpected additional income.

The situation is different in the Ukraine The massive Russian air war against the energy infrastructure as well as war-related import costs for fuel and fertilizers will push Ukrainian growth to just 1.0 percent in 2026 – albeit from a low level.

In Hungary, on the other hand, the economy could be facing upheaval after Péter Magyar’s election victory against long-term Prime Minister Viktor Orbán. The initial situation is characterized by economic stagnation, a high budget deficit and frozen EU funds. The designated head of government is planning an ambitious economic program including the introduction of the euro. However, recovery will likely take time, which is why wow Moderate growth of 1.6 percent is forecast for Hungary in 2026, which is expected to rise to 1.8 percent in 2027.

Eastern Europe supports Austria’s economy

For Austria, the Central, Eastern and Southeastern Europe region remains a strong export base. In 2026, the 23 countries in the region will make the largest external contribution to domestic GDP growth of all trading partners at 0.12 percentage points. Austrian companies producing in Eastern Europe are losing competitiveness due to rising wage costs, according to wow However, new potential arises. Due to the shortage of personnel, the Eastern European industry is forced to invest more in the automation of production – an area in which providers from Austria are traditionally strongly positioned.