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The External Debt Sustainability in Southeast European Countries: The Analysis of Debt Indicators

Despite the overall improvement in macroeconomic situation in Southeast European countries (SEECs) after 2000, external imbalance is still one of the main macroeconomic problems in region. SEE countries have recorded huge trade deficits, mainly results of the import boosting effect of the strong domestic demand, which greatly influence the development of current account balance. Altogh the current account balances in SEECs have been improving during 2005, the deficits are still very high and the average reach 9.4% of GDP. The aim of this paper is to analyse the external debt indicators for seven Southeast European countries that have been included in the Stability Pact in order to assess their external position. According to the methodology of the IMF, we use two sets of debt indicators: those based on flow variables (ratio of external debt to GDP and ratio of external debt to exports) and those based on stock variables (ratio of international reserves to short-term debt). We conduct this external debt analysis within the overall macroeconomic framework of these transition economies, taking into account the expected key macroeconomic variables, especially GDP growth and interest rates. Since the assessment of the external debt sustainability is strongly related to the external sustainability, the important part of our analysis refers to the level and composition of the current account deficit in Southeast European countries.

Southeast Europe; external debt; debt indicators; current account

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