IMF: Reforms Necessary to Boost Growth Potential in Central and Eastern Europe

The International Monetary Fund’s regional representative stated that Central and Eastern European countries need to implement reforms to boost economic growth amid rising demographic pressures and escalating challenges stemming from competition from Chinese exports. Carlos Mulas-Granados, speaking at a conference organized by the financial news website Portfolio, said that medium-term economic growth forecasts for the Central and Eastern European region have been revised down to an average of 2.5 percent by 2026, compared with around 5 percent before the region’s countries joined the European Union, according to Reuters. He added, “Growth forecasts have become less positive, and the time needed to close the convergence gap with Western Europe has become much longer.” He continued, “The region cannot be expected to grow at the same pace in the coming years unless it strengthens its growth potential, and achieving this will not be easy.” He noted that the region’s contribution to the European Union’s economic growth has declined to 27 percent during the 2020–2026 period, down from 30 percent before the COVID-19 pandemic, partly due to weaker export prospects for Germany, which is the main trading partner for Central European countries. Mulas-Granados emphasized the need for regional countries to continue diversifying their trade as a driver of growth, and to address population decline by increasing the labor market participation of young people, women, and older adults, alongside accelerating innovation and enhancing readiness in artificial intelligence. He also urged regional countries to transform the energy, climate, and defense sectors into new growth engines, rather than relying primarily on American or South Korean suppliers for equipment purchases, as defense spending rises.