the impact of the western high - tech embargo will be felt more strongly. chances are slim for any improvement in the medium term, with the recent https : / / www. libertarianism. org / columns / immanuel - kant - war - peace https : / / fee. org / media / 4512 / mises0404. pdf https : / / www. cambridge. org / core / journals / journal - of - economic - history / article / abs / role - of - war - in - moderninflation / c34e37999f088f965c64c9c61a543a8b, see also : https : / / www. globalresearch. ca / war - causesinflation / 22616 https : / / www. clevelandfed. org / publications / economic - commentary / 2007 / ec - 20071201 - a - brief - history - ofcentral - banks https : / / wiiw. ac. at / economic - forecast - for - eastern - europe - the - worst - is - yet - to - come - n - 570. html partial mobilization resulting in a labor shortage, as hundreds of thousands of men are either enlisted into the army or leaving the country. similarly, the economies in cesee have held up better than initially thought. the expansion in the first half of the year has exceeded expectations, so that the eastern eu economies are projected to grow by almost 4 % on average in 2022. this is due to the recovery after the pandemic, rising incomes and solid demand from germany. the region is bracing itself for a tough winter, however, as the situation is likely to change dramatically in the coming months. while the sanctions have so far had weaker - than - expected impacts on the russian economy, they are due to leave their mark in the long run. unlike in russia, outright recession is not yet in the cards for europe. even though the euro area economy has fared better than expected in the first half of 2022, the economic consequences of the war continue to darken its outlook while pushing up inflationary pressures. economic activity is likely to stagnate in the winter as headwinds from gas supply disruptions and surging energy prices are mounting. without a doubt, russia ’ s full - scale invasion of ukraine has been a watershed moment that will have enormous repercussions for europe and beyond.

the performance of a few sectors, which makes the economy more vulnerable in the case of asymmetric shocks. last, but not least, i also want to point out the social dimension of growth – every group in society should benefit from the growth process such that the build - up of social inequalities and the resulting pressure on political economic institutions can be contained. with these considerations of balanced growth in mind, let us briefly look back on the precrisis economic developments in cesee in order to have a reference for the intensity of the recession in 2009 and the related adjustment process since then. bis central bankers ’ speeches chart 1 high growth correlated with the build - up of severe vulnerabilities and imbalances h igh growth correlated with the build - up of severe vulnerabilities and imbalances average annual gdp per capita growth ( 2000 - 07 ) current account deficit % % of gdp estonia romania lithuania latvia bulgaria slovakia croatia czech r. hungary poland slovenia bulgaria latvia estonia lithuania romania hungary croatia poland slovakia slovenia czech r. share of foreign currency loans average annual growth in h ouse prices ( 2004 - 07 ) % of total loans % latvia estonia croatia hungary lithuania romania bulgaria poland slovakia czech r. slovenia latvia lithuania bulgaria estonia poland slovenia slovakia czech r. hungary croatia romania source : wiiw, eurostat, ncbs, ameco, imf, bis, ecb, national statistical offices, reas. between 2000 and 2007, the cesee countries were – besides china and india – one of the fastest growing regions in the world ( average real gdp per capita growth : 8. 2 % ). this outstanding growth performance was mainly driven by large foreign capital inflows, which fuelled domestic credit growth, led to a surge in asset prices ( in particular house prices ) and considerably boosted domestic demand. however, as you can see in chart 1, the sizable gdp growth was generated on the back of rising vulnerabilities. soaring prices and wages were one of the consequences of sharply rising domestic demand. as a matter of fact, double - digit inflation rates were not unusual during the boom years. on top of very strong lending growth in the years preceding the crisis, a large part of domestic loans to households and companies was – and in some countries still is – denominated in foreign currency. growing internal imbalances were also reflected by the development of the external sector. increasing internal demand led to an appreciation of the exchange rates in countries with floating