Poland’s GDP to grow by 3.7%, CEE by 2.6%

Central and Eastern Europe (CEE) is set for stronger economic growth in 2025, with GDP expected to expand by 2.6%, according to a report by Erste Group. The forecast marks an improvement from previous years, driven by higher consumer spending, increased investment, and inflows of EU funds.

Poland boosted by unfrozen EU funding

CEE’s most populous EU member state, Poland, is projected to be one of the region’s fastest-growing economies, with a projected GDP increase of 3.7% in 2025, according to an upwardly adjusted estimate by the National Bank of Poland (NBP). The country’s growth is driven by investment, entrepreneurial activity, and regulatory reforms aimed at boosting competitiveness, the NBP added.​

Poland’s economic performance in 2024 was bolstered by household spending and public expenditure. Retail sales in January 2025 surged by 4.8% year-on-year, significantly exceeding market expectations of 1.5%.

The manufacturing sector also showed signs of recovery, with the Purchasing Managers’ Index (PMI) surpassing 50 points for the first time in three years. Despite these positive indicators, uncertainty surrounding the Ukraine conflict and broader global economic trends remain potential risks.

Investment is forecast to strengthen due to increased EU funding in 2025. After funds had been frozen under the previous government, last year Poland received EUR 12.2bn in cohesion grants and EUR 13.4bn in Recovery and Resilience Facility (RRF) loans, with further inflows expected in 2025. This could push investment growth to approximately 7% annually over the next two years. However, net exports are anticipated to continue weighing on overall growth, with improvements expected in 2026.

The Polish zloty has appreciated against the euro, reaching a peak exchange rate of 4.19 PLN/EUR, its strongest level in a decade, on Monday, 17 March, thanks to delayed interest rate cuts and political stability. However, uncertainties related to global developments, particularly in Ukraine, may affect the currency’s trajectory.

Poland’s fiscal deficit remains a concern, with 2025 projections estimating a shortfall of 5.8% of GDP. Significant expenditures on defence (4.7% of GDP), healthcare (6%), and renewable energy initiatives are driving the deficit.

Fiscal consolidation is expected to commence in 2026, with a planned reduction to 4.5% of GDP. Public debt is projected to rise to over 60% of GDP in the coming years, stabilising at around 61%.

Promising growth prosepects for Serbia, Croatia

Croatia’s GDP is forecast to rise by 3% in 2025, following an upgraded growth estimate of 3.5% for 2024 by the World Bank. The country benefits from strong tourism revenues and EU-funded infrastructure projects.

Czechia and Hungary are predicted to experience growth of 2.4% and 1.8%, respectively, reflecting moderate economic expansion in both countries.

Serbia’s GDP is set to grow by 4% in 2025, following an upward revision of 3.8% for 2024 by Erste Group. The country’s economy is supported by government-led investment initiatives and foreign direct investment.

Consumer confidence driving growth

The economic outlook for CEE is underpinned by several key factors, as rising consumer confidence is expected to drive household spending, supporting domestic demand. Increased EU fund inflows will help finance infrastructure projects and industrial expansion, while higher industrial output is set to boost exports.

Despite the positive outlook, CEE faces several risks. The ongoing war in Ukraine continues to pose geopolitical uncertainties that could affect trade and investment. Changes in global trade policies, particularly with the US, may impact export-driven economies in CEE. Additionally, inflationary pressures remain a concern, as persistent price increases could weaken consumer purchasing power and investment activity.