Over the past two decades, the countries of Central and Eastern Europe (CEE) have significantly narrowed the gap with the more developed economies of the EU-15. This progress can rightly be described as an economic miracle. Yet today, the region faces new challenges: the green energy transition, demographic shifts, and the effective use of artificial intelligence. Researchers from the Warsaw School of Economics (SGH) outline three possible scenarios for the future. They argue that overcoming institutional barriers and climbing to a higher level of innovation will be the key to sustaining growth.
“The economic situation in this part of the region is not bad, as all economic indicators show. We are increasingly catching up with the old EU member states, the distance between our economies and those of the EU-15 is shrinking, although there are challenges,” said Prof. Piotr Wachowiak, PhD, Rector of SGH, in an interview with Newseria.
“We believe that the term ‘economic miracle’ is justified, particularly in the context of Poland, where growth has been the fastest, but also in other countries of the region,” added Dr. Piotr Maszczyk, head of the Department of Macroeconomics and Public Sector Economics at SGH.
Between 2004 and 2024, eleven CEE countries recorded the highest GDP growth among all EU models of capitalism, averaging 3.2% annually—nearly three times higher than the EU-15 average of 1.2%. According to the 2025 SGH and Economic Forum report, real income convergence has been spectacular: after 21 years of EU membership, the CEE-11 narrowed their development gap with the EU-15 by over 31 percentage points, reaching on average 75.2% of EU-15 GDP per capita. Romania led the way (45 pp. gained), followed by Lithuania (40 pp.), Bulgaria (33 pp.), and Poland (30.5 pp.). Productivity growth—averaging 1.4% annually—was the main driver, contributing 45% to overall GDP growth.
Economists attribute this success to the development of a so-called “patchwork capitalism” model, which combines loosely connected elements from different systems—feudalism, socialism, and capitalism.
“Patchwork capitalism seems to be reaching its limits as a growth engine. We use the term ‘institutional short-sightedness’—it was relatively easy to catch up to 75% of EU-15 levels, but as those familiar with the ‘middle-income trap’ know, closing the final 20 to 25 percentage points is very difficult. That won’t be possible unless the negative aspects of patchwork capitalism in CEE are eliminated, for example by raising innovation levels,” stressed Dr. Maszczyk.
Artificial intelligence technologies could serve as a powerful catalyst, potentially boosting CEE’s GDP by €90–100 billion annually (around 5%), or up to 8% in an accelerated scenario. However, Poland faces a double gap in AI adoption and digital skills: only 5.9% of Polish companies use AI, compared to the EU average of 13.5%.
“We should put more emphasis on ensuring that more companies adopt and apply AI, because this can give us a competitive advantage in the future,” noted Prof. Wachowiak.
SGH economists also stress the need to increase investment, since Poland’s growth has so far relied heavily on consumption, as recent Statistics Poland (GUS) data confirm. In the CEE-11, R&D spending (1.28% of GDP in 2023) is half the EU-15 average (2.17%), creating a major barrier to innovation.
“We cannot reach the level of the old EU unless we become more innovative. Wage growth depends on increasing value added in enterprises, and that requires innovative products. In value chains, we mostly produce components of final goods, which keeps us in the middle-income tier. We must move toward the beginning of the value chain—innovation, research, and development—but also toward the end, producing more goods under our own brands. Instead of producing car doors or aircraft panels, we need to create products that carry our own logos,” explained Dr. Maszczyk.
The report presents three scenarios for the CEE-11 economies: baseline, warning, and optimistic.
- In the baseline scenario, the pace of real convergence slows, meaning that in the next decade the region will not catch up to the EU-15.
- The warning scenario foresees divergence: by 2035, average GDP per capita relative to the EU-15 could fall below today’s levels. Interestingly, Poland is projected to be an exception, improving its position by 5 percentage points.
- The optimistic scenario assumes that the region overcomes the institutional limits of patchwork capitalism. This would require higher R&D spending not only by governments but also by private businesses. If this happens, both the region and Poland could, within ten years, reach the EU-15’s level of GDP per capita (in purchasing power standards).
Other major challenges include the energy transition and demographic shifts.
“When it comes to energy, we must think about diversifying sources to lower costs,” said Prof. Wachowiak. “Another issue is demography and the shrinking number of young people, which makes smart migration policy essential. Without foreign workers, neither we nor other European countries will manage. A wise migration policy would attract skilled individuals who could quickly adapt to local social and cultural conditions.”
