For Central and Eastern Europe, 2026 will be characterized by significant geopolitical realignment, internal political shifts, fiscal consolidation and a number of high-stakes electoral contests. As in recent years, Russia remains the primary security threat – not only to war-torn Ukraine but also to NATO’s eastern flank and, indirectly, to the wider CEE region. The Baltics states have adopted “war-time economy” postures, raising defence spending to unprecedented levels, while Poland, also the region’s largest economy, is working heavily on strengthening its Eastern Shield defence initiative. This focus on deterring Russia has triggered significant tax reforms and diverted funds from social sectors, potentially risking public criticism in certain countries.
In Ukraine, a positional war is expected to persist throughout 2026 unless the ongoing peace negotiations secure a lasting settlement. Kyiv faces a transactional U.S. approach to military support, forcing a strategic balancing act between Washington’s peace proposals and European security interests. Accordingly, the ongoing war or its termination will continue to be the decisive element for Ukraine’s domestic political processes, economic development and international relations throughout 2026, including potential presidential and parliamentary elections, which are on hold due to martial law. External pressure will be persistent in the case of neighbouring Moldova, as well, however the country’s renewed pro-EU majority following last year’s parliamentary elections will offer policy predictability and continued alignment with the European bloc.
Domestically, Poland and Romania are navigating complex dynamics that impact their broader stability. Poland remains in a state of co-habitation between a pro-EU coalition government and a conservative President. This relationship is expected to be a primary source of domestic friction as the President can utilize vetoes, constitutional referrals and presidential legislation as a counterweight to the centrist ruling bloc. Romania enters the year in a high-risk environment characterized by a fragile four-party and pro-EU coalition and significant fiscal pressure to reduce the budget deficit. In both countries, the management of EU funds and energy independence remain critical priorities for maintaining economic momentum.
In Czechia, the political landscape is shaped by the recent electoral victory of the ANO movement as the new three-party governing coalition, which holds a narrow majority in parliament, has initiated a systematic overhaul of public administration while adopting a transactional stance toward certain EU policies. Elsewhere in the region, Bulgaria is set to reach a major milestone with its official entry into the Eurozone, which is expected to eliminate currency costs and increase transparency despite risks of administrative pressure on the private sector. In parallel, Sofia faces (yet again) an unwanted electoral cycle in the spring and an uncertain presidential race later this year.
Hungary’s April parliamentary election is unarguably this year’s most anticipated electoral contest in CEE. For Budapest, the primary political risk is the unprecedented uncertainty surrounding the election. The rise of the main opposition TISZA party has created the most contested race since 2010, presenting an unprecedented challenge to the rule of the governing Fidesz-KDNP alliance. Beyond the election itself, the next government will face significant policy uncertainty regarding unavoidable fiscal adjustments, the future of windfall taxes and the pace of re-engagement with EU institutions to unlock frozen recovery funds.
Following the mega election year of 2024, Croatia enters 2026 with a continued rivalry between Prime Minister Andrej Plenković and President Zoran Milanović. Despite ongoing polarization, the Plenković Cabinet retains a solid parliamentary majority, ensuring policy continuity and supporting Croatia’s focus on energy, infrastructure and defence. Slovenia by contrast faces a highly unpredictable election year in which a polarized environment may lead to a protracted government formation period.
Aretera's Annual Forecast for 2026 - Central & Eastern Europe
