Banks continued to scale back their exposure to Central, Eastern and South Eastern Europe (CESEE) countries by 0.3 per cent of GDP in the first quarter of 2014, roughly by the same amount as in Q4 2013.

The monitor reports that the scale of funding continued to vary across countries in Q1 2014.

Foreign portfolio flows to CESEE, excluding Russia and Turkey, remained strong in the first quarter of 2014 with an increase in international bonds issued by CESEE countries.

Overall credit growth remained low outside Turkey and CIS countries, particularly for non-financial corporates credit, and domestic deposits continued to grow everywhere except Hungary and Slovenia.

Recent surveys suggest a weak outlook for credit growth. The Institute of International Finance’s Bank Lending Conditions Survey for Q1 2014 shows a tightening in lending conditions in the region with the overall index falling to 46.7.

The latest CESEE Deleveraging and Credit Monitor for Q1 2014 was prepared by the staff of international financial institutions taking part in the Vienna Initiative's Steering Committee.