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By Peter Apps
LONDON, Jan 27 (Reuters) - The European Bank for
Reconstruction and Development slashed its growth forecasts for
emerging Europe to 0.1 percent for 2009 on Tuesday as the global
crisis pushes the region to the brink of contraction.
In November the EBRD had predicted 3 percent growth in 2009
and estimated 2008 growth at 6.3 percent. The EBRD said it was
reducing its estimate of 2008 growth to 4.8 percent.
It has said several times this year that it was revising its
forecasts, predicting lower 2009 growth.
Set up at the end of the Cold War to help former communist
economies adjust to free markets, the EBRD operates in 30
countries including Mongolia and -- since late last year --
Turkey.
Amongst the most appealing emerging markets until last year,
emerging Europe is now seen as probably the emerging region most
exposed to the global financial crisis, with several countries
pushed to the brink of recession.
"The EBRD region is feeling the full impact of the global
slowdown, mainly because of the region's increased integration
within the global economy," said EBRD chief economist Erik
Berglof in a statement.
"The ability of these countries to withstand such a major
external shock over the longer term will depend largely on the
speed of the recovery of the global economy, the combined
efforts of individual governments and international financial
institutions, including the EBRD, to safeguard financial systems
in the region and the support of foreign banks to their eastern
subsidiaries."
The EBRD said its November forecast had not included Turkey
and that the bank had revised its GDP weightings since then.
When these factors were taken into account the November forecast
for 2009 growth would have been 2.5 percent.
Despite lower shorter-term growth prospects the EBRD
expected a rebound in the medium term, possibly as early as next
year.
It cut its 2009 growth estimate for Russia to 1 percent from
3 percent in November, with Southeastern Europe expected to show
growth of 1.5 percent, down from 7.3 percent in 2008.
"Positive growth in these countries reflects still strong
domestic demand, and in some cases lower levels of financial
integration but the risk of an even sharper slowdown is high,"
Berglof said.
Growth in Central Europe and the Baltics was seen at 0.4
percent this year from 3.9 percent last year, with Central Asia
seen growing at 2.3 percent from 4.9 in 2008.
Economic contraction was expected this year in Ukraine,
Hungary and the Baltic states.
The bank predicted the Ukrainian economy, facing banking
problems, a collapse in the steel price and now higher gas
prices from Russia, would likely contract by 5 percent, Hungary
by 2 percent and Estonia, Latvia and Lithuania by 3.5, 5.0 and
2.5 percent respectively.
For table of EBRD growth forecasts, see []
(Reporting by Peter Apps)
