Central-East Europe will retain competitive advantage

Subject

The next development stage for CEE economies.

Significance

The global recession of 2008-09 and the ensuing euro-area crisis of 2011-12 hit the eleven Central-East European (CEE) EU member states hard. The crises raised questions about the region's growth model, which was heavily reliant on foreign capital inflows that are unlikely to return to pre-crisis levels for the foreseeable future. At the same time, CEE countries are approaching the limits of easy catch-up growth, and face the challenge of moving to more knowledge-driven economies. However, the struggles of other large emerging markets as they approach the middle-income trap, combined with evidence of continued dynamism in CEE economies, are resulting in fresh appreciation of their strong underlying fundamentals.

Impacts

• West European firms will continue to look to invest in CEE as they seek to become more competitive.
• CEE countries' continued competitiveness suggests that economic convergence with Western Europe will continue for most.
• CEE economies will remain a source of economic dynamism for the EU.