Private sector debt still a major concern in parts of the region

Domestic demand has been subdued across much of Emerging Europe over the past five years in part due to the fact that households and firms have been deleveraging following the credit boom of the past decade. But while there has been a significant reduction in debt ratios in the Baltic States, and there are few signs of strains in private sector balance sheets in most of Central Europe, little progress has been made in the south east of the region (Bulgaria, Croatia and Romania).