IMF says global mkt troubles expose risks for CEE

... discipline, a senior IMF official said on Monday.

John Lipsky, First Deputy Managing Director of the International Monetary Fund, said countries in the region have performed very well in the past few years.

Large-scale capital inflows into the region have boosted economic growth, but they have also contributed to creation of very large current account deficits, he added.

"That means, the current period of financial turbulence does pose some risks and creates some vulnerabilities that have to be watched closely," Lipsky told an economic conference in the Austrian capital, Vienna.

He said the countries most exposed to the risks were those with fixed exchange rate regimes such as currency boards.

Central Europe, with growth rates outpacing the European Union, needs credible domestic policies to avoid a more marked economic impact from the tightening in global credit markets since the subprime mortgage market crisis in the United States.

"The risk of financial market difficulties externally creates some new vulnerabilities that place heightened emphasis on the responsibility of domestic policies," Lipsky said.

"But ... our base case at the IMF is that ... adjustment efforts globally are going to be favourable, and that would sustain a favourable outlook for that region, if the correct policies are followed domestically."

(Reporting by Peter Laca; Editing by Ruth Pitchford)

Keywords: IMF EAST/VULNERABILITY

[VIENNA/Reuters/Finance.cz]