The article analyzes if current account deficits in transition economies in Central and Eastern Europe are sustainable. Factors like capital inflows and fixed exchange rates have caused real exchange rate appreciation, leading to loss of competitiveness and worsening current account balances. Weak banking systems, large fiscal imbalances, low foreign reserves, and increasing foreign debt also contribute to external balance fragility. However, short-term portfolio investments are still limited in these economies, reducing the risk of sudden capital outflows.