From Debtors To Creditors. The Story Of The Cee-11 Countries

The aim of the article is to analyze the direction of capital flows into the 11 CEE-UE countries from the year 1995 to 2020. Until 2012 balances of payments of the CEE-11 region were characterized by current account deficits and consistently increasing inflow of net foreign capital. It was the result of excessive private and public consumption and domestic investment in relation to the generated income. Currently, when in most CEE-11 countries the current account balance has been characterized by surpluses for several years, the question arises whether such a situation is only temporary and results, for example, from a decrease in the level of foreign financing and the adjustment of the current account to this state, or it is permanent and results from increased efficiency and competitiveness in international markets. In the latter case, it would mean moving these economies to a period in which they begin to pay off their debts and have a chance to change their status from debtors to creditors. Although the fact that the CEE-11 countries have become foreign creditors in recent years may seem very positive and indicate that they are quickly catching up with developed countries, closer analysis shows that the main entities investing abroad in these countries are central banks. If the foreign exchange reserves are omitted, it turns out that the remaining cumulative components of the financial account still have a negative balance. This increases the indebtedness of the private and public sectors in the region. Although central banks remain the main foreign investor of the CEE-11 region, it should be hoped that this stage will be only transitional (intertemporal) and that they will be supplemented soon by private investors.