Integration of non-euro area central and eastern European EU countries in global value chains, export dynamics, and business cycle synchronisation with the euro area

This box reviews developments in non-euro area EU countries in central and eastern Europe with respect to trade integration and economic synchronisation with the euro area and investigates the potential exposure of their export dynamics to changing external conditions. The six economies are now an integral part of European production networks and net exports are a key driver of business cycle synchronisation with the euro area. In recent years, however, the business cycles of the six countries have somewhat decoupled from euro area economic activity. The potential drivers of this decoupling include robust domestic demand, lingering effects of past foreign direct investment in industry, the nature and final use of exports and the resilience of exports to countries outside the euro area. So far, the ongoing moderation in manufacturing, including in the automotive industry in Germany, and the escalation of trade tensions have been only partly reflected in the six economies. JEL Classification: E32, F15