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Once again, the main risks to growth and financial stability to the Central Eastern European countries seem to emanate from the global picture, and in particular from the developments of the sovereign debt crisis in Europe.
In this context, Central Eastern European (CEE) countries are in a sensibly better situation than a year ago, but also worse than two months ago. The CEE region has weathered the European sovereign debt crisis relatively well to date, as growth indicators continued to improve during the second quarter of this year; however, the difference between confidence indicators and real production data has widened somewhat.
In the current recovery phase countries most open to the global trade cycle are seeing the greatest benefits, as exports are still a key source of growth across the region. On the other hand, the recent downside surprises in German confidence indicators are somewhat worrying. Meanwhile, as we outlined in our previous Quarterly publication (titled “Two speed recovery”) domestic demand (mostly household) is still very weak and we do not foresee a meaningful change in this picture in the coming quarter.
Will the Eurozone debt problems negatively affect EEMEA growth? So far the Eurozone sovereign debt crisis has manifested itself in a sharp depreciation of the EUR, wider bond spreads and a diverging growth differential between core and periphery countries. Although a full-blown crisis would certainly have negative implications for capital flows (and hence on the EEMEA region) we believe the EEMEA region will continue to perform relatively well.
 more
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CEE Quarterly, 03/2010 (PDF; 2.1 MB)
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