Erste: CEE countries’ fiscal deficit up during crisis, below Euro Area; Romania achieves most striking result

The fiscal deficits of CEE countries increased during the crisis, but remained well below more problematic Euro Area countries, and the most striking result was achieved in Romania where the structural deficit has been reduced from almost 9 percent of GDP in 2007 to about 3.3 percent of GDP, as estimated by the European Commission for 2011, according to the “Is CEE better prepared to weather the storm than in 2008?” report conducted by Erste Group.

‘’At a first glance, the current situation in CEE might look similar to the post-Lehman period, as the spill-over channels remain the same. So, if the Euro Area decelerates sharply, Central and Eastern Europe will not avoid contagion. But there are three reasons why CEE should do much better this time (relative to the Euro Area) than in the post-Lehman period: much lower public debt levels, improved fiscal consolidation and trimmed down current account deficits," says Juraj Kotian, Co-Head Macro/Fixed Income Research CEE at Erste Group.

About the public debt, CEE countries are not as indebted as the western countries. “Challenging situation in terms of current account imbalances, sustainability of public 140debt or contingent liabilities in the banking sector like Eurozone peripheral countries,” shows the report.

Also, because the CEE economies are now in a completely different stage of their economic cycle compared to three years ago, the current downturn has a less severe impact upon their economic growth, according to Erste Group.

Read the entire report here.