Central and Eastern European Economies – Achievements and Prospects

Abstract

The article presents the economic growth in selected Central and Eastern
European (CEE) economies since they recovered from the transformational
recession in the early 1990s. The growth prospects for the region, including
the present and future opportunities and challenges, are discussed against the
past achievements and more recent crisis experience. The presented analysis
is limited to ten CEE countries that joined the European Union between
2004 and 2007 (EU 10).
The article aims at answering three main questions: 1) What were the
key drivers of rapid growth in the EU10 countries in the pre-crisis period?
2) What is the explanation of the very divergent economic performance of
the EU10 countries during the recent crisis of 2008–2009? 3) Can the region
return to a sustainable growth path and if so when and under what conditions?
And specifically, what are the key policy recommendations that could
be addressed to CEE governments if economic growth is to be sustained?
The analysis shows that between 2000 and 2008 economic growth in all
EU10 countries followed a specific pattern based on large inflows of foreign
capital, and supported by trade, financial and institutional integration within
the EU. These inflows have pushed up growth rates but also contributed
to the emergence of various economic imbalances, making most of EU10
increasingly vulnerable to external shocks. Countries that have accumulated
largest imbalances suffered most during the crisis. As far as the growth prospects
in the post-crisis period are concerned, the policy recommendations
focus on the need to eliminate these imbalances while preserving the growthenhancing
elements of the growth model followed before the crisis.