The weak economic situation in the industrialised nations had a downstream impact on the emerging economies. Although Central and Eastern Europe (CEE) was also affected by the global downturn in the previous year, the region again succeeded in generating a positive growth differential compared with most industrialised nations. Despite the slowdown over the course of the year, Poland continued to be one of the best performers in CEE in 2012, recording a growth rate of 2.1 per cent. Slovakia also saw stable growth of 2.4 per cent. Economic performance in the Czech Republic was impacted in particular by dramatic public-sector austerity measures (minus 1.1 per cent year-on-year), while Hungary was also affected by a downturn in public-sector demand (minus 1.7 per cent year-on-year). Following the political unsettlement caused by the country’s negotiations with the International Monetary Fund, confidence among international investors in Hungary’s politics and economy improved on the back of the general recovery in the second half of the year. However, the overall picture remained disappointing.
The economies of Southeastern Europe saw extremely varied development in some cases. Bulgaria generated GDP growth of 1.5 per cent. Rigorous savings measures in Romania meant that GDP growth stagnated at 0.2 per cent. Among the Balkan nations, Serbia (minus 2.0 per cent) and Croatia (minus 1.8 per cent) both saw downturns in GDP. GDP growth in Ukraine was just 0.2 per cent. At 3.4 per cent, Russia recorded the highest growth rate in the region.
Many of the nations in Central and Eastern Europe are not directly affected by the problem of excessive growth in sovereign debt. The protracted process of debt relief among private households and companies and the other consequences of the financial crisis are mainly being felt by the industrialised nations. The ratio of public debt to GDP in the euro zone increased to more than 90 per cent in 2012. By contrast, sovereign debt in most CEE nations was considerably lower than 60 per cent of GDP. Nevertheless, economic policy in a number of EU member states (Poland, Romania, Czech Republic and Hungary) and candidates (Croatia, Serbia) is concentrated on measures aimed at achieving the Maastricht criteria.
The relaxation in the euro crisis meant that investor confidence in Central and Eastern Europe increased in the second half of 2012. The cuts to key lending rates by some central banks as the result of falling inflation offer potential for a further boost to economic development in Central and Eastern Europe over the coming year.