ED – this is bne IntelliNews's annual OUTLOOK report for Central Europe. We are making forward-looking assessments for major Global Emerging Markets in Emerging Europe, Asia, Latin America, Africa and the Middle East, drawing on insightful reporting from our bureaus around the world.

What is on the agenda? What are the prospects for economic growth, and what problems lie in store in the coming year? The detailed reports cover business, economics, finance, energy, politics and the major sectors of the most important markets.

As crucial elections approach in several Central European countries, much of the region enters 2026 politically polarised. Social tension, geopolitics and the legacy of inflation and cost of living pressures are reshaping electoral dynamics. At the same time, economic performance is diverging sharply, with the export-dependent Visegrád states struggling to regain momentum while the Baltics show modest recoveries.

In Hungary, the emergence of Péter Magyar’s Tisza party is breaking the dominance of Prime Minister Viktor Orbán’s Fidesz and creating what increasingly resembles a de facto two-party system. Tisza’s pro-EU, anti-corruption platform and credible nationwide organisation are set to turn the April 2026 election into the most competitive contest in Hungary in more than a decade. For the first time, Orbán faces a challenger capable of mobilising disaffected urban voters while also appealing to parts of Fidesz’s conservative base.

The campaign is already characterised by aggressive rhetoric, disinformation and the use of state resources. Orbán’s renewed focus on Ukraine — portraying EU support for Kyiv and fast-tracked accession as existential threats — signals that geopolitical fear-mongering will be central to Fidesz’s strategy. At the same time, the government is rolling out an exceptionally large pre-election fiscal package. While politically effective, these measures embed long-term budgetary costs into an already fragile fiscal position, raising the risk of post-election consolidation shocks.

Slovakia’s political trajectory is less dramatic but still has the potential to lead to instability. Prime Minister Robert Fico’s left-right populist coalition continues to alienate large segments of society with its Kremlin-friendly rhetoric. With Fico’s Smer party sliding in the polls and Progressive Slovakia leading, there is a prospect of early elections, yet should this happen, no configuration promises a stable majority.

Czechia moved to the right with the inauguration of Andrej Babiš’s ANO-led government in December 2025. ANO’s coalition with far-right Freedom and Direct Democracy (SPD) and the anti-green, Eurosceptic Motorists for Themselves represents the most right-leaning government in Prague since World War II. Although President Petr Pavel has acted as a partial institutional brake, the coalition’s parliamentary majority gives Babiš scope to reshape policy. His likely alignment with Budapest and Bratislava raises the prospect of a new Central European eurosceptic bloc, even as Babiš attempts to soften those fears diplomatically.

In the Baltics, Latvia’s October 2026 parliamentary election will test the resilience of its fragmented coalition system, while Estonia’s presidential election will provide an early indicator ahead of the 2027 parliamentary race. Lithuania is experiencing heightened tension following the inclusion of the radical right Dawn of the River Neman in government, with disputes over media governance triggering warnings about creeping “Orbanisation”.

Economically, Central Europe is struggling to regain momentum after a prolonged period of stagnation. Hungary illustrates the region’s vulnerability to external demand. After repeatedly revising down its 2025 growth forecasts, GDP is now expected to expand by just 0.3-0.4%, implying three years of near-zero growth. The export-oriented industrial sector remains in contraction, reflecting weak automotive demand in Germany and other core markets. Household consumption remains the main driver of growth, and that is being propped up by tax cuts rather than by genuine income confidence.

Czechia’s performance has been more resilient. GDP growth of 2.8% year-on-year in the third quarter of 2025 indicated a less severe blow from US tariffs than originally expected. Rising wages and revived household consumption have offset weaker external demand, making domestic spending the key growth engine. However, this also leaves the economy vulnerable to any reversal in consumer sentiment, particularly if inflation or fiscal tightening returns.

In export-oriented Slovakia, growth slowed in 2025, weighed down by weak household consumption and the country’s heavy dependence on car exports — one of the sectors most vulnerable to US President Donald Trump’s trade policy. Although manufacturing and investment showed some improvement in 2025, the need for fiscal consolidation threatens to further suppress domestic demand in 2026.

The Baltics present a more balanced, if unspectacular, picture. Lithuania is expected to lead with growth around 3%, followed by Estonia at just over 2% and Latvia below 2%. Weak demand from Nordic countries and Germany will constrain exports, but EU-funded investment and defence spending will provide a stabilising buffer. Inflation should ease to around 2.5-3%, supporting a gradual recovery in real incomes, while European Central Bank (ECB) easing will provide limited monetary relief.

In a number of countries across the region, fiscal positions are deteriorating as defence spending rises toward 5% of GDP and populist governments expand social transfers. Hungary’s pre-election giveaways and Slovakia’s delayed consolidation raise the risk of sharp post-election austerity. In the Baltics, which have ramped up defence spending, deficits are likely to remain close to 3-4% of GDP, gradually pushing debt higher. Structurally, Central Europe remains trapped between weak productivity growth, labour shortages and over-reliance on external demand.