The ruble rolls - or not.

According to a new forecast, the economic outlook for Russia and Ukraine, the two countries at war, continues to deteriorate. In Russia, growth in 2025 is expected to halve compared to the previous year, to two percent, according to the Vienna Institute for International Economic Studies (wiiw). Moscow can only expect an increase of 1.8 percent in 2026.

The decline is primarily due to the Moscow Central Bank's monetary policy slam on the brakes in an effort to get inflation under control. High interest rates of 20 percent are choking the economy because they make loans unaffordable, forcing many citizens to leave their money in the bank, said wiiw Russia expert Vasily Astrov. "Unsurprisingly, there's also a risk of a wave of corporate bankruptcies, some of which could even affect large corporations and leading companies."

Things aren't looking any better for Ukraine. The destruction of critical infrastructure by Russian attacks is leaving ever-deeper scars, according to the think tank's Ukraine expert, Olga Pindyuk. "The worsening labor shortage due to mobilization for war is also weighing heavily on the economy."

Added to this are the effects of a poor harvest in Ukraine due to drought and the temporary end of tariff relief for agricultural exports to the EU. For 2025, the institute revised growth by 0.5 percentage points to 2.5 percent compared to the spring forecast. Inflation in the country is at 16 percent. Key interest rates are correspondingly high.

Among the 23 countries in Central, Eastern, and Southeastern Europe examined for the summer forecast, Poland stands out in terms of growth, with 3.5 percent both this year and next year, it said. Bulgaria, Croatia, and Lithuania could also expect a noticeable economic upturn.

Many countries in Eastern and Southeastern Europe will grow faster than the Eurozone in 2025 and 2026, primarily thanks to private consumption. "This will enable them to continue their economic catching-up process with Western Europe," the institute said.