The CESEE countries’ intrinsic strengths came to the fore only later, as privatized industries were restructured and reforms were implemented. The capital and foreign investment thus attracted propelled productivity and competitiveness, which in turn boosted economic growth. This unprecedented social, political and economic metamorphosis was paralleled and supported by the process of European reunification.
However, it is important to recognise that maturation of financial markets takes time. Hence, sometimes capital flows may have to be managed through other instruments in the short term, while continuing to work on development of the financial markets. Increase in absorptive capacity of the economy could be a mitigating factor in the context of large inflows.