As usual in the Q1 issue of our SEE Review, we publish our macroeconomic outlook for the countries in the region. Before we elaborate more on our 2012 projections it’s always worthwhile to provide a critical assessment on developments that took place in the course of 2011. Looking back in 2011(although the final figures for the year are not yet available), it becomes obvious that the priorities of the countries in the region have shifted from a growth at-all-costs attitude towards an effort for a more balanced approach to economic development. This is primarily evident in the significant improvement of the current account balances in the region. The most impressive improvement has been that of Bulgaria’s that has managed to shift from a CA deficit of 1.3% in 2010 to an estimated surplus of 1.2% last year. The second area of improvement was the fiscal balances of the SEE economies where most governments managed to achieve deficits very close to their targets, even though extra measures were often required. Such an effort of course came at the price of positive yet below our expectations GDP growth. Most economies undershot our estimates and only Romania seems to be providing a positive surprise. One outlier in all directions appears to be Cyprus. The Cypriot economy underperformed versus our expectations in GDP growth, fiscal balances and current account deficit. Without any attempt to underestimate the structural issues of the Cypriot economy we can not ignore the substantial impact that the destruction of the Vassilikos power plant had on economic activity, tax revenues and government expenditure. As the situation normalizes we expect a substantial reversal of this trend going forwards. Turning now our attention to 2012, we maintain our positive stance towards the region. Nevertheless this should be seen as a relative assessment i.e. positive compared to our view for the Euroarea as a whole and especially the EU-periphery, rather than an absolute one i.e. not against their past performance or their growth potential. In an apparent reversal of roles developments in the Euroarea have stopped acting as a paragon of stability and growth for the region. Instead, we estimate that a mild recession in the Euroarea over the course of the year coupled with renewed pressure on EU banks to deleverage will be the two key negative factors affecting the prospects in the SEE region. As a result, we expect Albania to grow by 2.7% (vs. 2.6% expected GDP growth in 2011), Serbia by 1%(vs. 1.5% expected GDP growth in 2011), Bulgaria by 0.7% (vs. 2.5% expected GDP growth in 2011), Cyprus by 0.7% (vs. 0.4% expected GDP growth in 2011) and Romania by 1.4% (vs. 3% expected GDP growth in 2011).