However, a balanced account of the process of financial integration in this region must not overlook such drawbacks as excessive, cheap lending, currency mismatches and demand overheating in the years running up to the crisis.
Between 2003 and 2008, many economies recorded rapid import growth, real-estate bubbles and wage increases far outpacing productivity gains – sometimes rooted in overly optimistic expectations of fast income convergence. Inflationary pressures spilled over into the tradeable sector and cut into export performance. Balance-of-payments deficits on current account widened (Figure 7).