through the interest rate or liquidity channel. having in mind the state of the fiscal finances particularly vulnerable segment seems to be the government sector. the screening of the fiscal position of the countries in the region, shows that without doubts financial crisis took a toll on the fiscal positions of the countries. against the background of countercyclical fiscal policy headline balances deteriorated sharply and the public debt went on a rising track. the deterioration in the fiscal position and lack of fiscal space ( due to low initial space before the crises ) emphasized the need for consolidation. most of the countries of the region recognized it and embarked on the consolidation path. in the 2013 - 2015 period the budget deficit figures show that nine out of fourteen countries of the region have already reduced the deficit level compared to the 2008 - 2012 period. the other five countries ( macedonia, albania, serbia, bulgaria and slovenia ) increased the deficit reflecting idiosyncratic factors, countercyclical policy ( macedonia, bulgaria ), or recognition of implicit liabilities ( emergency recapitalization of the country's banks in slovenia ). the same dynamics is more or less mirrored by the government debt data. after the strong initial debt rise, the consolidation phase imposed slower borrowing pace, however in most of the countries the debt continued to rise. analyzing the countries, only 5 countries of them, czech republic, poland, hungary, latvia and estonia, managed to reduce the debt in the 2015 / 2013 period. these countries, with the exception of hungary are less vulnerable when it comes to the government debt as they belong to the so called " lower indebted countries ". on the other side, the debt rise in the latest period additionally inflated already high levels of debt and deepened the vulnerable positions of some of the countries in the region ( slovenia, croatia, serbia and albania ). chart 11 : fiscal indicators, developments in different periods of time budget balance, in % of gdp mkd alb cro bul srb bih slo czr est hun lat lit pol rom debt change, in p. p of gdp - 2 - 4 - 6 - 5 - 10 - 8 - 10 - 20 - 30 mkd alb cro bul srb bih slo czr est hun lat lit pol rom - 10 average 2002 - 2007 average 2008 - 2012 average 2013 - 2015 debt change 2013 / 2009 debt change 2015 / 2013 debt level 2015 ( left scale ) source : weo october 2016

and even to a decline in liabilities across all sub – regions in the most recent period. when dissecting the structure of the international labilities, similar to the bop data, a decline in the debt component in the last three years is noticed. the strongest intensity has been recorded in the cee countries, but also in the other two regions as well, which was not the case to the bop data where a very mild increase in the other two sub - regions is observed. according to the iip data, deleverage refers to all three sectors, not only to the banking system, and it has been present in the last 3 years, with the exception of the banks where the deleveraging started since the emergence of the crisis. same conclusions on portfolio flows, derived from the bop data, can be also drawn from the iip position. they continued to grow in the postcrisis period, driven mostly by the debt component of the government. as for the foreign direct investments, their growth in the last period stalled, mainly due to the decline observed in the cee countries. in the other two sub - regions growth continued, but at a much slower pace especially during 2012 - 2015 period. overall, the data indicate that the ecb policy measures positively affected financial conditions in the region. first, loosening of the monetary stance through conventional instruments ( policy rate ) created a room for loosening of the monetary stance in the central and south eastern economies without negative implications for the balance of payments. reduced policy rates led to reduced lending rates thus decreasing the costs of borrowing of the private sector. second, the ecb asset purchase programs that resulted in unprecedented increase of liquidity most probably positively affected the liquidity conditions in the region, as well. although at a significantly decelerated pace, capital inflows continued in most of the countries of the region. exceptions are the outflows from the banks in the context of the process of deleveraging, although the outflows might have been bigger in absence of asset purchase policies. portfolio investments have been relatively solid, explained to a great extent by governments ’ borrowing on the international markets. although the capital inflows were not sizable leading to creation of imbalances in the economies, vigilance is warranted. the pre - crisis process of rapid worsening of the net international position was stalled, but with differences across countries. the improvement is visible for cee and baltic states, while see region registered