Growth expected in Eastern Europe

RIGA - The International Monetary Fund has raised its 2010 growth forecast for the economies of Central and Eastern Europe to 2.8 percent as global trade recovers, reports Bloomberg. The Washington-based lender, which revised higher its January regional estimate of 2 percent, said in its world economic outlook that Slovakia will expand the most in the region, with 4.1 percent growth after a 4.7 percent contraction in 2009.

However, Hungary, Lithuania and Latvia will be the worst performers this year, the IMF predicted. Latvia, which was forced to take a 7.5 billion euro bailout loan led by the IMF and the EU as it suffered the EU’s deepest recession, will contract 4 percent and Lithuanian GDP will shrink 1.6 percent. Hungary’s economy will contract 0.2 percent, it said.
“The normalization of global trade has contributed significantly to growth in the euro area and in emerging Europe,” shows the report. “Forceful policies have also fostered recovery, including supportive macroeconomic and financial sector measures” and “coordinated assistance from multilateral institutions for the hardest-hit economies.”

The recovery will be held back in some countries by fiscal and external imbalances, even though current-account deficits narrowed during the crisis in many cases, the IMF said. “Fiscal balances deteriorated sharply across the board as a result of large output losses and costly crisis-related measures,” the report says. “Consequently, some countries in the region emerged from the crisis with weak external and public sector balance sheets. These imbalances are dimming the prospects for growth in these countries.”
GDP in Poland, the largest eastern member of the European Union and the only EU state to avoid a recession during the global financial crisis, will grow 2.7 percent this year and 3.2 percent in 2011 from 1.7 percent last year, the report forecast.

The IMF predicts 4 percent growth for Russia this year, with 3.3 percent next year, in contrast with a 7.9 percent fall in 2009. A similar growth of 4 percent is also predicted for Ukraine this year and next, after last year’s 7.9 percent slide.