(Adds Bulgarian c/a gap; Raiffeisen profit decline)
* Hungarian prelim Q2 GDP falls 7.6 percent versus ago
* Romanian Q2 GDP down 8.8 percent year-on-year
* Slovak Q2 GDP down 5.3 percent year-on-year
* Czech June retail sales fall 4.9 percent yr/yr
* Bulgarian C/A gap shrinks to 6.3 pct/GDP
By Marton Dunai and Justyna Pawlak
BUDAPEST/BUCHAREST, Aug 13 (Reuters) - Struggling emerging
European economies showed deep contractions in the second
quarter, lagging glimpses of improvement in the West and
underscoring the steep climb they face back to recovery.
The collapse in euro zone demand for the cars and
electronics produced in export-heavy central and Eastern Europe
has cast almost all of the region into a deep plunge, with only
Poland seen as potentially escaping contraction this year.
Hungary's economy shrank by a record 7.6 percent from a year
earlier in the second quarter as industry continued to struggle
and agriculture suffered.
In Romania, the economy fell 8.8 percent, in an acceleration
from the 6.2 percent fall in the first quarter, cementing
expectations of further monetary easing.
Hungary's drop -- the worst since quarterly figures were
first published in 1996 -- was below market forecasts for a 7.1
percent decline, and analysts said a fall in domestic activity
would remain a brake on the economy.
Better-than-expected data from some euro zone members gave
some rays of hope, with GDP in Germany -- the top destination
for emerging Europe's exports -- rising unexpectedly. But
analysts said it would still be a long slog to recovery.
"The good news is that most recent European data releases
point to the bottoming out of the European cycle, which suggest
that the Hungarian economy could have reached the bottom in Q2
as well," said Mariann Trippon, analyst at CIB Bank.
"The recovery, however, is likely to remain extremely slow."
Markets shrugged off the data. Hungary's forint rose 1.2
percent on the day to 268 per euro, and was followed closely by
the Polish zloty, which was up 0.8 percent.
The Romanian leu eased, but only slightly. It was down 0.07
percent to 4.215 to the euro.
ROMANIA HURTING
Euro zone member Slovakia -- the world's top exporter of
cars per capita -- saw gross domestic product fall by 5.3
percent, less than the 5.6 percent fall in the first quarter.
But what began as a foreign-demand led contraction has
trickled into domestic economies in the former communist east.
Banks have tightened lending conditions, and weakened firms
are laying off tens of thousands of workers, pushing up
unemployment and causing wage growth to stagnate.
In Bulgaria, falling domestic demand slashed the current
account deficit by more than half to 6.3 percent of annual GDP
through June, from 13.1 percent deficit a year earlier.
And in the Czech Republic, retail sales fell 4.9 percent
year on year in June. It was worse than analysts expectations of
a 3.8 percent decline and followed a 7.5 percent fall in May.
Analysts said household pain would now be a main drag on
recovery as export-driven factories began to get new orders from
their main markets in the West.
"While exports and industrial output should respond quite
quickly to the gradually improving picture in major export
markets, i.e. the euro zone, household consumption in the Czech
economy has yet to see its worst moments," said Radomir Jac of
PPF Asset Management.
The picture was also grim for Romania, where growth of 9.3
percent in the second quarter of last year has since slammed
into reverse.
Underscoring its woes, the International Monetary Fund
agreed this week for Romania to run a gaping budget deficit of
7.3 percent gross domestic product to account for the "severe"
recession that has eaten into tax revenues.
The higher ceiling has still forced budget tightening which
analysts said would act as a brake on any expansion, while
analysts also said they expected Romania's central bank to lower
interest rates from their level of 8.5 percent now.
"A double-digit drop in GDP for 2009 cannot be ruled out,"
said Lars Christensen from Danske Bank in Copenhagen. "There is
no sign of stabilisation in the second quarter, contrary to what
we for example have seen in the euro zone."
DIFFERENT SPEEDS
Analysts said market watchers could potentially begin to
extrapolate signs from the data of which countries in the region
would emerge from the crisis first.
They said those with fewer budget and structural problems
like Poland and the Czech Republic would stand out over others
needing deeper reforms and more adjustment after riding
credit-fuelled booms to high growth earlier this decade.
The latter of those include Hungary, Romania, Bulgaria, and
the Baltic states -- where Lithuania and Latvia are expected to
see their economies shrink by as much as a fifth this year.
That was illustrated by the first half results of emerging
Europe's No.2 lender, Raiffeisen International, whose net profit
dropped 93 percent on the year as the bank, highly geared
towards crisis-ridden Ukraine, Russia and Hungary, saw bad debt
rise by a third to 6.8 percent of its loan book.
The earnings decline stood out among its peers in the region
like UniCredit or Erste Group, which are less exposed to the
more risky countries and were able to slow down, and sometimes
reverse, the earnings decline in the second quarter.
"The Hungarian and Romanian data underline the depth of the
recessions they are going through. In both of those countries,
it would be too soon to talk about a return to growth," said
David Oxley, emerging Europe economist at Capital Economics.
"The ones to be more optimistic about are Poland, the Czech
Republic and Turkey."
(Writing by Michael Winfrey; Editing by Andy Bruce)
