Poland, Czechs to escape recession -EU forecast

By Marcin Grajewski

BRUSSELS, Jan 19 (Reuters) - Poland, the Czech Republic, Bulgaria and Romania will escape recession among the European Union's new member states from central and eastern Europe, the European Commission said on Monday.

The EU's executive arm said in a special economic forecast their growth rates would be much lower then previously thought while the economies of Hungary, Estonia, Latvia and Lithuania will contract in 2009 due to the global financial crisis.

The Commission also increased its budget deficit forecast for most EU newcomers, showing their path towards joining the euro zone could be more bumpy than earlier predicted.

The Commission revised down its growth forecast for Poland, the biggest country in the region, to 2.0 percent in 2009 and 2.4 percent in 2010, from 3.8 percent and 4.2 percent anticipated respectively in a previous forecast in November.

Poland's budget deficit is forecast to grow from 2.5 percent of gross domestic product in 2008 to 3.6 percent in 2009 and 3.5 percent in 2010, more than its government expects and above the 3.0 percent limit for a country than wants to adopt the euro.

Poland hopes to join the euro zone in 2012, meaning its deficit should be below that level in the preceding year and forecast to stay that way.

The Commission scaled down its growth forecast for the Czech Republic to 1.7 percent in 2009 and 2.3 percent in 2010 from previous 3.6 and 3.9 percent.

The Czech Republic, which has said it could join the euro zone in 2013, is expected to keep its deficit below 3 percent in 2009 and 2010 -- at 2.5 percent and 2.3 percent.

Hungary, which only in 2006 had a staggering deficit of 9.3 percent, is forecast to trim its shortfall to 2.8 percent in 2009 and 3.0 percent in 2010.

The Hungarian economy, which has had to seek International Monetary Fund help to support its markets, is expected to contract by 1.6 percent this year before returning to 1.0 percent growth in 2010.

The forecast confirmed the financial crisis has hit the Baltic republics especially hard in central and eastern Europe.

Latvia, which has also sought IMF help, is forecast to see its economy shrink by 6.9 percent in 2009, the biggest contraction in the 27-nation EU, and by 2.4 percent in 2010.

Lithuania's GDP is to fall by 4.0 and 2.6 percent in 2009 and 2010 respectively, while Estonia will return to growth of 1.2 percent in 2010 after contracting by 4.7 percent in 2009.

Bulgaria and Romania are both expected to see growth rates at 1.8 percent and 2.5 percent in 2009 and 2010, but the previous will keep its budget deficit below 3.0 percent while the latter's shortfall will shoot to 7.5 and 7.9 percent.

(Writing by Marcin Grajewski, editing by Andy Bruce) Keywords: EU FORECASTS/CENTRALEUROPE XX:SU:REUTERS#SN:nLJ565574#XX:1382383.0#HS:RAMSTXT_9088_2009-1-19_111709_1_18#DU:lanreunxd1+lanreunxd2+lanreznxd1+lanreznxd2+rekwire+reawire+rexwire+bsu8rtr#XN:##XP:tfukfipdistw.datastream.com ~

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