Author Description

This Update focuses on the macroeconomic developments and capital flows in the transition region in 2004. Average growth in the region was 6.5 per cent, the strongest year since the beginning of transition, showing the benefits from the improved global economy, strang domestic demand, and - in the case of the resource-rich Commonwealth of Independent States (CIS) - continuing high commodity prices. Growth is expected to slow to 5.2 per cent in 2005, reflecting a less favourable global environment. Net capital inflows reached US$ 47.4 billion, and portfolio investments were worth US$ 20.4. The Update recognises several risks to future progress: fiscal imbalances in central eastern Europe and the Baltic states; political instability and large external imbalances in south-eastern Europe; and resource dependence in the CIS.