South East Europe

RGE's Q1 2010 South East Europe Outlook

In the run-up to the global financial crisis, the South East European economies we cover (Romania, Bulgaria, Croatia and Serbia) enjoyed high-flying growth rates, driven by strong capital inflows. In 2009, these economies slipped into recession on slowing domestic demand and a poor export environment. To avert balance-of-payments crises, Serbia and Romania turned to the IMF for financial assistance in Q4 2008 and Q1 2009, respectively.

The pace of contraction in the region, with the exception of Bulgaria, has slowed in recent months, but the recovery will be slow and fragile. Household consumption, the main component of GDP in these economies, will stay subdued due to tight credit conditions, rising unemployment rates and slow income growth. Sluggish credit growth and reduced capacity utilization paint a bleak picture for investment in 2010. Moreover, governments in the region have embarked on fiscal consolidation paths in 2009 and 2010. Among the four South East European (SEE) economies covered, Bulgaria will likely experience the slowest recovery as its currency board acts as a drag on exports, eroding competitiveness.

Read the Q1 2010 South East Europe Outlook.