Most Eastern Europe economies will grow faster than previously expected in 2010 and 2011, benefiting by a stronger rebound in Western Europe and higher commodity prices, according to a new ERBD report.
The more rapid growth means that after a hiatus in 2009, most countries in the region will once again close the gap in incomes per person with western Europe, although according to the report of the European Bank for Reconstruction and Development released Thursday, the "rate of convergence will be less spectacular than in the past."
There will be big differences in growth rates. The EBRD said it now expects Bulgaria's economy to grow by only 0.4% in 2010, having in July forecast that it would contract by 1.2%. And it said Romania's contraction will be shallower that expected, with the nation's GDP falling by 2.0% rather than the 3.0% forecast in July.
Furthermore, while eight countries in Central Europe and the Baltic will see their gross domestic product increase by 2.2% this year and 3.0% next, seven countries in Southeastern Europe will see their GDP fall by 0.6% in 2010, and expand by just 1.6% in 2011.
The EBRD's region of operation suffered more severely than other emerging markets from the financial crisis and the recession that followed, largely because it had relied more heavily on foreign bank lending.
As a result, it hasn't received the strong capital flows that have been a feature of Asian and Latin American economies since 2009, forcing some to resort to capital controls and currency interventions.
Two strong eastern economies are expected to grow.
The forecast for Russia is to maintain the pace of growth it has seen in recent quarters, with expansion of 4.4 percent forecast this year, rising to 4.6 percent in 2011.
Good news are predicted for Turkey's economy. Their strong rebound is expected to last into early 2011.
The EBRD said it now expects that the 29 economies in which it invests will grow by 4.2% this year and 4.1% in 2011, having forecast in July that they would grow by 3.5% and by 3.9% respectively.