Among developing regions, Europe and Central Asia has been hit the hardest by the global economic and financial crisis.
For several countries, a combination of international support, adjustment programs, and perhaps even private sector debt restructuring will be needed to avoid large-scale defaults.
After years of growth over 6 percent, real GDP growth in the region slowed to 4 percent in 2008 and is expected to drop 4.7 percent in 2009, driven by a collapse in capital inflows, a sharp deterioration in terms of trade, and contraction in both domestic and external demands.
The robust domestic demand that supported support, growth throughout 2007 and through the first three quarters of 2008 began to wane at the height of the crisis in September 2008.
High levels of foreign currency denominated private sector and house hold dept, rising unemployment, and broadening recession in trade partner countries contributed to dramatic declines in GDP in several countries in the fourth quarter of 2008.
The Baltic states of Estonia and Latvia suffered the most adverse impact with GDP falling by 9.5 and 10.5 percent relative to a year earlier, with other emerging markets such as Turkey and Ukraine also recording negative growth.
In several countries with data available for the first quarter of 2009, output deteriorated further on a year-on-year basis.
Economic activity continued to shrink in Hungary (4.7 percent), Lithuania (13.6 percent), and Latvia (17.9 percent), while Romania and Russia stepped for the first time into negative growth territory (6.4 and 9.4 percent, respectively).
Poland, the only economy to show resilience, posted a modest GDP increase of 1 percent.
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