Mapping EM private credit: The opportunity in Central and Eastern Europe

26 May 2026

With strong fundamentals and key areas of structural demand, Central and Eastern Europe offers a compelling opportunity for emerging market private credit. Central and Eastern Europe (CEE) occupies a distinct position within the emerging market universe. It bears many of the characteristics of developed markets. The region's sovereign ratings are largely investment grade, most countries are members of the European Union, providing a broadly stable institutional framework, while real wage growth has consistently outpaced the EU average for more than a decade. But for private credit investors, it shares the most important characteristic of the broader emerging markets opportunity set: a structural financing gap that banks and public capital markets have only partially addressed. That gap is widening. The region faces an estimated annual infrastructure investment need of €65–75 billion, with €50 billion required just to maintain its existing stock.1 A rapid renewable energy build-out is outpacing grid development, creating strong demand for flexible capital. Data centre construction is accelerating as hyperscalers extend their European capacity eastward, and the reshoring of manufacturing supply chains is generating a growing class of corporate borrowers. Against these demands, domestic banks remain relatively selective in their lending, local corporate bond markets are relatively thin and pan-European direct lending funds have largely competed for larger, private equity-backed deals, leaving the middle market significantly underserved. This could prove a conducive environment for patient, specialist capital. A favourable macro backdrop CEE economies are forecast to meaningfully outgrow the EU average over the next two years. According to IMF projections, Eastern Europe (excluding Russia) will grow at a two-year average of 3.2%, Central Europe at 2.8% and Southeastern Europe at between 2.3% and 3.9%, compared with around 1.3% for advanced European economies.2 In terms of individual countries, Albania is expect to grow 3.6% in 2026, Poland by 3.5%, Bulgaria by 3.1% and Lithuania by 2.9%, all well ahead of the 1.3% expected for the euro area.3 These figures reflect structural dynamics, supported by strong domestic demand and sustained EU-backed capital investment. Figure 1: CEE expected growth vs euro area in 2026 (per cent)<img loading="lazy" src="/getContentAsset/c3d1b4df-d340-4882-8250-27396cb72c62/cb87803a-320c-480f-ab75-7b9029eaaf79/CEE-expected-growth-vs-euro-area-in-2026.png?language=en" alt="CEE expected growth vs euro area in 2026 " title="CEE expected growth vs euro area in 2026 " style="width: 100%" class="fr-fic fr-dib"> Private consumption has been the primary engine of regional GDP, underpinned by real wage gains that Eurostat data shows ran at roughly 20-40% across the region from 2014 to 2023, compared with approximately 10% in the euro area.4 Meanwhile, unemployment in countries such as Poland and the Czech Republic is among the lowest in the EU. And while the inflationary shock of 2022–23 hit CEE hard – EM Europe saw the highest CPI of any EM region, peaking above 20% – the disinflationary trajectory has been clear, with Poland and Romania both returning towards the 4-6% range and Czechia normalising to around 2-3%.5 The region's exposure to US trade policy volatility is also structurally lower than in Western Europe. The United States accounts for only roughly 3-5% of total exports from Poland, Hungary, Romania and Bulgaria, compared with 10-32% for Ireland and Germany.6 Intra-European flows dominate, with Germany, Italy and Austria among the primary trading partners. The relative lack of US trade exposure offers meaningful protection in a period of elevated global trade uncertainty. Figure 2: Key destinations for CEE exports <img loading="lazy" src="/getContentAsset/87fce6dc-32c5-40a8-b099-55356e5b2500/cb87803a-320c-480f-ab75-7b9029eaaf79/Key-destinations-for-CEE-exports.png?language=en" alt="Key destinations for CEE exports " title="Key destinations for CEE exports " style="width: 100%" class="fr-fic fr-dib"> The financing gap Despite strong macroeconomic fundamentals, access to capital remains a significant constraint across the region. Domestic credit to the private sector as a percentage of GDP remains materially lower in CEE than in Western Europe. In Romania, the figure stood at just 23% in 2023, compared with over 100% in France and the UK.7 Even in more financially developed CEE economies, private sector credit penetration trails Western peers substantially. This reflects a banking system that, while generally well capitalised, applies conservative lending standards to mid-market corporates and is poorly suited to financing the kind of long-term, merchant-exposed or transition-related assets that characterise the current investment cycle. The European Investment Bank and European Commission estimate the CEE region needs annual investment equivalent to roughly 4-7% of GDP for the energy transition, infrastructure modernisation and digitalisation.8 External capital to help finance these areas is therefore essential. To date, private credit has seen limited penetration, with just €2 billion of deals completed between 2021 and 2024, 85% of which were in Poland. While some estimates suggest this could more than double to €4.7 billion by 2030,9 this is tiny in the context of a $2 trillion global market. However, we believe the true potential of the region’s private credit market is significantly larger, with the most attractive opportunities in the middle market. Large corporates can access bank financing and, in some cases, international capital markets. At the other end, SME lending is often supported by local banks or development finance institutions. It is the middle that remains consistently underserved – companies that lack access to institutional capital but require flexible financing beyond what domestic banks are willing or able to provide. The competitive landscape reinforces the opportunity. Local funds are involved in around 98% of transactions in the region, while international managers have participated in just over a quarter, often alongside local players rather than competing directly with them.9 The market is dominated by locally owned business without private equity backing, which pan-European direct lending funds have typically bypassed in favour of larger, PE-sponsored transactions. Competition for this segment is limited and the structural gap between what banks provide and what these businesses need could create genuine pricing power for specialist lenders. Figure 3: Domestic credit to private sector (% of GDP)<img loading="lazy" src="/getContentAsset/3899bcaa-29c2-45dc-b0e9-3403193adc27/cb87803a-320c-480f-ab75-7b9029eaaf79/Domestic-credit-to-private-sector.png?language=en" alt="Domestic credit to private sector " title="Domestic credit to private sector " style="width: 100%" class="fr-fic fr-dib"> Credit quality: Higher than the EM label suggests For investors who see emerging markets as high-risk, the credit profile of CEE offers a very different picture. Sovereign ratings across the region are concentrated in the BBB to A- range – well above the median for EM broadly, where the majority of sovereigns are rated BB+ according to S&P Global.10 Average corporate ratings in the region cluster around BBB– to BBB, with issuers sectors including utilities, energy and infrastructure largely maintaining investment-grade profiles. EU membership provides a structural anchor. Institutional quality, fiscal discipline and access to EU support are all reflected in rating agency assessments. S&P's sovereign risk indicators show lower risk weights for CEE EU members relative to other EM sovereigns with similar income levels. This is because of contractual protections, enforcement mechanisms and governance quality that materially reduce the risk of lending in the region. Debt dynamics are also superior to many developed markets, with CEE sovereigns reporting lower public debt-to-GDP trajectory than the likes of the euro area, US, Japan and China. Where developed market governments have responded to consecutive crises this decade through large-scale fiscal programmes, CEE economies have generally remained within more conservative borrowing parameters. Private sector leverage is correspondingly moderate: the absence of a deep leveraged buyout market means that most middle-market borrowers carry manageable debt loads rather than the stretched capital structures that have come to characterise parts of the developed market direct lending universe. Figure 4: Public debt CEE vs developed markets (% of GDP)<img loading="lazy" src="/getContentAsset/2bdef213-6de0-4a90-8981-10018773853a/cb87803a-320c-480f-ab75-7b9029eaaf79/Public-debt-CEE-vs-developed-markets.png?language=en" alt="Public debt CEE vs developed markets " title="Public debt CEE vs developed markets " style="width: 100%" class="fr-fic fr-dib"> The energy transition: A generational financing opportunity The most immediate and substantial private credit opportunity in CEE sits at the intersection of the energy transition and market structure. Renewable capacity is being added at a rapid pace – solar and wind power facilities, for example, are forecast to continue growing sharply across Poland, Romania, Bulgaria and Hungary through 203511 – but grid and storage development is not keeping pace. The result is significant electricity price volatility, particularly in Romania and Bulgaria, where limited balancing and storage infrastructure has driven regular spikes and troughs in the hourly power market.11 For traditional lenders, such volatility represents risk. For flexible capital providers, it creates opportunity. Battery energy storage systems, flexible generation assets and independent power producers are obvious beneficiaries, but the opportunity extends further: smart metering programmes, grid component manufacturing financing and greenfield construction debt for projects at ready-to-build stage all form part of a coherent, complementary pipeline. The European Commission's REPowerEU agenda and Recovery and Resilience Facility disbursements are accelerating this transition, with Poland alone receiving significant support through 2027 directed at energy infrastructure and green transformation.12 Government and EU backing reduces equity risk on transition assets without eliminating the need for flexible debt – a combination that benefits specialist lenders. Digital infrastructure: From laggard to growth corridor The CEE region is in the early stages of a significant digital infrastructure build-out, driven by accelerating cloud adoption, AI demand, hyperscaler expansion and EU-backed digitisation programmes. The region is rapidly establishing itself as a cost-efficient alternative to Western European data centre markets, with power constraints and high land costs in traditional hubs redirecting capacity eastward. Romania's data centre market is forecast to double by 2030, from approximately $595 million in revenue to around $1 billion.13 Poland stands out as the region's most mature market, with the capital Warsaw regarded as the primary secondary data centre market in CEE, with strong enterprise IT demand, growing hyperscaler presence and an extensive fibre broadband network. Bulgaria, despite its relatively low digital ranking within the EU, is emerging as a hub for nearshore outsourcing and cross-border connectivity, with Sofia and Plovdiv attracting secondary data centre investment. These dynamics are favourable for private credit. The shift from small retail colocation towards larger wholesale deployments means deal sizes are growing. The supply of Tier III/IV capacity remains well below regional demand, particularly outside major urban hubs, creating first-mover advantages. Fibre broadband penetration is uneven, and rural broadband remains underdeveloped. And the region sits at a strategically important intersection between Western Europe, the Middle East and Asia, making it a natural corridor for data transmission, a position that should increase demand across data centre development, fibre rollout, telecom tower consolidation and cross-border digital infrastructure. These are capital-intensive assets with long-term revenue visibility, often supported by contracts or quasi-regulated frameworks that private credit is well suited to finance. Industrials and near-shoring: Another structural tailwind CEE has emerged as a key beneficiary of the nearshoring of manufacturing and supply chains closer to EU consumer markets. Geopolitical pressure on extended Asian supply chains has accelerated a structural shift that benefits CEE economies with existing industrial capacity, competitive labour costs and deep integration into German and broader EU value chains. Major corporates such as Volkswagen, BMW, Google and IBM have expanded their presence in the region in recent years, driving demand for manufacturing facilities, logistics infrastructure, industrial automation and working capital solutions. Critically, many of these businesses generate hard-currency revenues through exports, reducing foreign exchange risk for lenders. In Serbia, lithium and EV supply chain expansion has emerged as a major driver of economic development, attracting international interest under Europe's critical raw materials agenda. The broader Western Balkans hold reserves of copper, lead, zinc and rare earth oxides. Romania and Poland both offer established industrial bases with strong legal and regulatory frameworks for private capital. These conditions could provide a steady pipeline of direct corporate lending opportunities with the characteristics that private credit does well: sponsor-less mid-market borrowers, hard assets as security, operating businesses with real cashflows and a structural need for capital. The diversification case For global investors, CEE private credit offers diversification on multiple levels. First, the underlying drivers of return are different. Unlike developed market direct lending, which has become increasingly correlated with public credit markets, CEE transactions are typically linked to real economic activity: infrastructure development, industrial expansion, energy transition and digitalisation. Second, the market is less crowded. Lower competition allows lenders to maintain pricing discipline and negotiate stronger terms. Around 71% of transactions in the region are senior secured, with approximately 59% carrying maturities of just one to three years.9 This combination of short duration and strong structural protections is rare in developed market private credit today, where covenant erosion and longer durations have become persistent features of the competitive landscape. Third, the rebound from geopolitical disruption is telling. Activity in 2022 and 2023 was severely constrained, with just eight deals completed across the broader EM European region during that period.14 The first nine months of 2025 saw $1.7 billion of deals, more than double the full-year 2024 total. That trajectory reflects both improving macro conditions and growing investor recognition of the case for private credit. But it also highlights how underdeveloped the market remains, and how much opportunity exists for well-positioned managers. Risks: Real, but manageable None of this is to suggest that risks are absent. Political dynamics, regulatory variation and currency volatility remain important considerations. The region is not immune to broader geopolitical tensions, particularly given its proximity to Ukraine. And the heterogeneity of regulatory and political environments across CEE means that local knowledge and origination networks are central to the investment proposition. However, many of these risks can be mitigated through structuring. Lending in hard currency reduces foreign exchange exposure, while agreements under English or New York law significantly improves enforcement predictability. Maintaining senior positions in the capital structure, incorporating strong covenant protections and focusing on borrowers with export revenues are all well-established features of private credit investing in the region. In summary Central and Eastern European private credit is still a market in formation. Yet the region brings together a set of characteristics that are increasingly hard to find in developed private credit: resilient growth, persistent funding gaps, investment-grade underpinnings and a level of competition that has yet to compress returns or weaken structures. Institutional frameworks have matured, while deal structures tend to favour lenders, with shorter duration and stronger protections. For investors willing to look beyond the US and Western Europe, CEE offers access to a market where capital remains scarce, discipline is rewarded and the alignment between risk and return remains intact. References<ol><li>GLOBSEC, Investment Gap in the CEE Region, October 2023.</li><li>IMF, Regional Economic Outlook: Europe, 2025.</li><li>MF, World Economic Outlook Update, January 2026.</li><li>Eurostat, Real Wages in CEE, 2014–2023. </li><li style="margin-left: 0" data-pasted="true">IMF, World Economic Outlook; Eurostat, December 2025.</li><li style="margin-left: 0" data-pasted="true">World Bank, WITS, December 2025.</li><li style="margin-left: 0" data-pasted="true">World Bank, World Development Indicators, Domestic Credit to Private Sector (% of GDP), 2023.</li><li style="margin-left: 0" data-pasted="true">EIB and European Commission, December 2025.</li><li style="margin-left: 0" data-pasted="true">Deloitte, Private Debt Report – Poland & Central Europe, June 2025.</li><li style="margin-left: 0" data-pasted="true">Bloomberg, S&P, Fitch, December 2025.</li><li style="margin-left: 0" data-pasted="true">BloombergNEF, 2025 Central and Southeast Clean Energy Market Outlook, 2024.</li><li style="margin-left: 0" data-pasted="true">European Commission, Recovery and Resilience Facility, referenced in Gemcorp Internal Research, December 2025.</li><li style="margin-left: 0" data-pasted="true"> Addleshaw Goddard LLP, Dispelling Misperceptions Around Emerging Market Private Credit, November 2025.</li><li style="margin-left: 0" data-pasted="true">Grand View Research, Europe data center colocation market size and outlook, December 2025.</li><li style="margin-left: 0" data-pasted="true">Global Private Capital Association, Private Credit Outlook, December 2025.</li></ol> Important Information:This content has been prepared solely for informational purposes by Gemcorp (as defined below), is confidential and may not be reproduced.This content does not constitute an offer or solicitation of an offer with respect to the purchase or sale of any security and should not be relied upon when evaluating the merits of investing in any securities or form the basis of an investment decision. 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