A Fragile Recovery: Emerging Europe since the 2008–09 Crisis

Abstract

Emerging Europe has been both the hardest-hit region in the world during the 2008–09 world financial crisis and the slowest to recover. These facts have a common origin: an exceptional pre-crisis capital inflow and credit boom, based largely on foreign currency lending, which both made the region very vulnerable to the external shocks of late 2008 and deterred new debt inflows and credit growth in many countries after the shocks had passed. It took more than two years, until mid-2011, for growth to return in almost all countries of the region. Ironically, this happy moment coincided with a new threat to the recovery, in the form of financial turmoil and slowing growth in the eurozone and other advanced countries.