Macroeconomic Impacts of the Crisis on European Emerging Markets

Abstract

The global crisis of 2008–2009 hit the Central and East European emerging markets disproportionally hard, albeit in a rather uneven manner across individual countries. Whereas Poland has been the only country which managed to avoid recession in 2009, the rest of the region suffered from a huge economic contraction (in some countries, e.g. the Baltics, triggered by flawed domestic policies initiated well before the Lehman crisis). The subsequent recovery has not been particularly impressive and the post-crisis GDP growth rates generally remain much below the previous performance. The process of the region’s economic convergence has stalled; some countries even fell behind the core EU in terms of relative development levels. The weak post-crisis recovery has been associated with stubbornly high unemployment, with younger and lower-skilled workers affected the most. This chapter will analyse differentiated patterns of economic performance in individual CEE emerging markets during the past decade with the help of comparable macroeconomic indicators from the wiiw database, identify the main transmission channels of the crisis as well as the driving forces of recovery. The role of diverse exchange rate policies, export specialization patterns, and competitiveness will be empirically evaluated and discussed as well.