Boom and bust in the Baltic countries — Lessons to be learnt

Abstract

For the first seven years of this decade, the Baltic countries experienced very rapid GDP growth. In 2007, though, the boom period turned to bust as country-specific factors such as the slowdown in credit growth dampened domestic demand growth. This was followed by the international financial crisis, which further limited the availability of foreign capital and pushed the Baltic countries into severe recession. This article looks in particular at the role of public finances, the impact of the fixed exchange-rate regimes and the need for a more balanced growth pattern in the future.