Central, East and Southeast Europe Caught by the EU Crisis

On the whole, 2012 was a disappointing year for the economies of Central, East and Southeast Europe (CESEE), confirming fears of a double-dip recession in the euro area adversely impacting large parts of the CESEE region. This rather poor performance stands in sharp contrast to the better dynamics in other emerging markets in Asia and Latin America, and underscores the dependence of large parts of the CESEE region on the troubled euro area – not least in terms of policies pursued. Weak exports and suppressed domestic demand pushed nearly half of the CESEE economies into recession in 2012, including the Czech Republic, Hungary, Slovenia and nearly all Western Balkan countries. Elsewhere in the region, growth continued but was generally unspectacular. Also in countries that hitherto had been relatively immune to the euro area crisis (such as Russia, Poland, Ukraine and Turkey), growth dynamics has been progressively decelerating since the second half of 2012.