EBRD blog European Bank for Reconstruction and Development

Category: Economic reports and forecasts

The root causes of FX lending in emerging Europe: new evidence and policy implications

Foreign currency (FX) lending is widespread in many parts of emerging Europe, with more than half of all bank loans in Bulgaria, Estonia, Hungary, Latvia, Romania, and Serbia currently denominated in (or linked to) a foreign currency (EBRD, 2010).… Read more

The Return of Capital Flows to Emerging Europe

Authors: Franziska Ohnsorge, Stephan Knobloch, Yevgeniya Korniyenko

Capital inflows have returned to many emerging markets since mid-2009.

Fuelled by abundant global liquidity and more favourable growth prospects and debt dynamics, they present better risk-return prospects than advanced economies (Chart 1) [1]

Large emerging markets in Latin America and Asia have received strong capital inflows and many of them have reacted by intervening in foreign exchange markets to avoid currency appreciation, whilst several of them have resorted to restrictions on capital inflows.… Read more

How will Fiscal Austerity Dampen Growth in 2010-11?

By Franziska Ohnsorge and Veronika Zavacka 

Pre-crisis, underlying fiscal positions of EBRD countries were significantly worse than apparent in headline fiscal deficits.  

Until 2007, many countries in the EBRD region enjoyed high real GDP growth which inflated tax revenues and disguised underlying fiscal weaknesses, including weak revenue-raising capacity and unsustainable expenditure increases.… Read more

Fostering growth in CEE countries: a country-tailored approach to growth policy

Co-authors: Philippe Aghion and Natalia Weisshaar

How to foster sustained growth in CEE countries

Before the onset of the global financial crisis, transition countries, particularly in Central and Eastern Europe, had embarked on what appeared to be strong and sustainable growth paths.… Read more

Making a financial sector levy work

Several countries in the EU have introduced, or are considering, a levy on the financial sector. There are some basic issues that need to be addressed urgently because, in Europe’s deeply integrated markets uncoordinated national measures are inefficient, can undermine the intended purpose of the tax and, if extreme in scope and size, may threaten lending capacity and ultimately recovery.Read more

Unwinding of Pre-Crisis Credit Booms Versus Recoveries

By Franziska Ohnsorge, Yevgeniya Korniyenko and Philipp Hochreiter

Private sector credit growth continues to be subdued in most of EBRD’s countries of operation (COOs), despite a gradual recovery of trade, industrial production and capital inflows in the second quarter of 2010.… Read more

Should Governments Regulate Away FX lending?

By Jeromin Zettelmeyer and Piroska M. Nagy

“Financial dollarisation” – domestic borrowing and lending in foreign currency (FX), even when the borrower’s income is in domestic currency – is back on the policy agenda. Unlike the 1990s, the victims of financial dollarisation are not longer mainly in Asia – which suffered particularly in its 1997-98 crisis – or even in Latin America. … Read more

Policy tightening at home and abroad weighs on short-term growth prospects, but should help Emerging Europe in the longer term

Authors: Franziska  Ohnsorge, Piroska M Nagy, Peter Sanfey

We’ve just published our latest update on Emerging Europe and Central Asia’s economic outlook which indicates that the recovery in the transition economies is progressing with important exceptions, and highlights the key factors behind this diverse picture.In many countries economic activity was strong in the first half of the year, but the outlook is dimmer, due to the short-term negative demand impact of fiscal austerity  packages and/or global exiting from crisis-related macro policy loosening: (i) in advanced EU countries (main export markets for emerging Europe), (ii) in transition countries themselves  (dampening domestic demand); and (ii) globally, as the rest of the world exits from crisis-related expansionary macro economic policies, weakening global demand for natural ressources and commodities. … Read more