Current Account Developments in Central, Baltic and South-Eastern Europe in the Pre-enlargement Period of 2002-2003

Vladimír Benáček ()
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Vladimír Benáček: Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic, http://ies.fsv.cuni.cz/

No 49, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: The paper assesses the developments in the current accounts of transition countries in Central, Baltic and South-Eastern Europe. Attention is given to policy issues, such as the relationship between savings, investments and government deficits, reinvested profits, official transfers from the European Commission and private transfers. The overall situation in the sustainability of current account deficits in studied transition countries is characterised as steadily improving and the majority of economies reached a stage where the current account is not an immanent threat to their growth any longer. However, economic policies in many of the countries need important adjustments in order to keep the economies in macroeconomic equilibrium. Particularly the trade deficit has been causing problems to external equilibrium. It is apparent that fiscal deficits, that have been on a rise in the last 2-3 years, are becoming the dominant factor behind the current account disequlibria. Reinvested profits of foreign investors and current transfers have been becoming gradually the instrument for bringing the current account deficits closer to their sustainable levels. The balance between the repatriation of profits by foreign investors and the reinvestment of such profits in the transition economies will play more important role in the future developments in the current account deficits or even surpluses.

Pages: 15 pages
Date: 2004, Revised 2004
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