Interesting piece in this week’s Economist regarding the lack of correlation among central and Eastern European economies during the credit crunch:

Tarring all with the mistakes of overheated Latvia, chaotic Ukraine or debt-sodden Hungary makes no sense. Nor does lumping together rich and poor countries, or those in the European Union and those outside. Exchange-rate regimes vary: two countries are in the euro; five countries have pegged their currencies to it; others float.

So far at least, speculators who counted on contagion toppling countries like dominoes have little to show for it, while those who bet the other way have juicy gains. Poland’s stockmarket is up by nearly 40% since its low in February, Hungary’s has risen by half and Russia’s by nearly 90%.

Poland received a $21b credit line from the IMF this month and is widely considered the region’s most resilient, partially due perhaps to the fact that domestic demand makes a relatively larger contribution to the economy. Polish firms make up a sizable chunk of certain frontier ETFs.

That said, one looming in the Polish economy (and most likely other central and eastern Europe nations) is the lack of commercial credit being extended by banks, which are 80% foreign-owned and have a 67% market share. Consequently, industrial and commercial companies find themselves delaying their payments to supplies (causing a cash-flow conundrum), while drawing down their deposits in order to fund operations, meaning banks are under continuous pressure to strengthen their capital bases while their owners are less than anxious to pour more money in.