Emerging Europe Outlook: Diverging paths in the face of US protectionism

Emerging Europe is generally less vulnerable than other EM regions to higher US import tariffs, but we have still nudged down some of our GDP growth forecasts for this year. We think the region will follow diverging paths – with Czechia and Poland outperforming in Central Europe, Romania and Hungary continuing to disappoint, and Russia experiencing a hard landing. Monetary policy is likely to be eased slightly more quickly than we previously thought in some places thanks to an improvement in the near-term inflation outlook, but the big picture is that stickiness in inflation will limit how far interest rates are cut into next year. Our rate forecasts for end-2026 are more hawkish than consensus.