CEE Countries to Avoid Major Credit Crunch Repercussions

CEE Countries to Avoid Major Credit Crunch Repercussions

Central and eastern European (CEE) countries will largely avoid the repercussions of the global credit crunch, Italian banking group UniCredit said in report. Stable economic growth over the past five years has been the consequence of rising incomes across the region, while infrastructure projects have spurred investment.

Banks have played their role too, as financial intermediation levels rose across the region from 23% in 2000 to 43% in 2007.

Southeast Europe and the Baltic States may experience some slowdown in credit growth, but that could have a beneficial effect, the report's authors said.
It would help countries in the two regions redress their macroeconomic imbalances, in particular the current account deficits, which have spiralled out of control in recent years.

With the region increasingly becoming the manufacturing hub of the continent, a slowdown of growth in western Europe could see even more companies relocating production eastwards, helping the CEE countries face the challenges of the global credit crunch more confidently.
Although economic growth will slow down, it will remain at a relatively high level for the region as a whole at a forecast 5,9% this year and 5,6% in 2008, compared to the 6,6% estimated by UniCredit for 2007.

UniCredit's analysts also believe there is as yet little danger of a real estate bubble, with the demand still outpacing supply across all segments, although they did warn potential investors to be careful when considering their investment options in the region.

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