Total external debt in CEE is much lower than that in developed countries, but what will sort out the strong from the vulnerable is how much of the external debt is denominated in foreign currency.
In some countries like Russia, the appreciating local currency meant that few, if any, loans were taken out in dollars or euros. In others, the lower interest rates and easy access to foreign capital meant that would-be homebuyers borrowed in euros or Swiss francs, and the wave of devaluations has burnt them badly by sending up their repayment costs.
While analysts say none of the CEE countries have exposed themselves to foreign exchange risk to the same extent as Argentina, which went into meltdown a few years ago after the government was forced to devalue, the level of foreign exchange exposure varies widely in the region and will be a key factor in deciding who comes out of the crisis first. Noticeably the strongest economies like Poland and Czech have the lowest forex borrowing, while the weakest like Hungary and Ukraine have the highest.
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