Funding and Stimulating Growth in Central and South Eastern Europe

This research examines the sources of funding and stimulating growth in emerging economies of Central and South Eastern Europe (CSEE). The results confirmed a combination of external and domestic factors being important for the growth in CSEE region in the past, with strong orientation towards domestic factors during the crisis. In addition, importance of the structural reforms and integration processes has been found, too. Panel estimation on the growth factors by groups of countries confirms the differences between Central European (CE) countries that are already EU members and SEE countries with lower level of convergence to EU. The continuation of the structural reforms, financing from abroad and continuous efforts towards EU integration improved the countries' ability to cope with the crisis consequences. The analysis on the future challenges points out the findings for limited synchronization of the economic cycle between the CSEE and the euro zone. The limitation of current policy mixture, rather limited domestic and foreign financing and the amplified need of policy nexus, will imply a need for redesigned growth model for the CSEE region.