E. European business climate deteriorates in spring

                                
 By Dave Graham
                                
 VIENNA, June 2 (Reuters) - Business sentiment in central and
eastern Europe declined this spring amid tougher financing
conditions and rising inflation, but the region is still on
course for robust economic growth this year, a survey showed on
Monday.
                                
 The latest Thomson Reuters & OeKB CEE Business Climate index
<REUTERSOEKB>, based on an April poll of 400 international firms
that manage 1,400 companies in the region, declined to 49 from
55 in a January survey.
                                
 All told, the survey findings indicate firms are still
upbeat about the economic growth outlook. As long as the index
is above zero, it shows corporate morale is positive.
                                
 So far, the economies of central and eastern Europe have
been resilient to the global financial crisis, Austrian export
financing bank Oesterreichische Kontrollbank (OeKB), which
prepared the survey, said in a statement.
                                
 "Nevertheless, the financial crisis has left its mark on
central and eastern Europe too," OeKB said. "One notable result
has been a rise in financing costs. Furthermore, the vast
majority of central and eastern European countries are fighting
rising inflation."
                                
 Overall the survey showed that economic growth in the region
-- which has outpaced that of the original 15 member states of
the European Union -- would continue this year, albeit at a
slower pace than in 2007, OeKB said.
                                
 All component parts of the survey declined, with gauges of
the business outlook and expectations showing the biggest
downward correction. Firms' assessment of the current business
situation held up best during the three month period.
                                
 Despite concerns that some countries running big current
account deficits financed by foreign debt -- such as Romania --
are vulnerable, direct investment of about 100 billion euros
($155 billion) should flow to the region this year, OeKB said.
                                
 Bulgaria was likely to receive the highest share of direct
foreign investment this year, the bank said.
                                
 A breakdown of the survey showed the mood had deteriorated
across the economy, most markedly in the real estate sector,
which had previously been very upbeat. Insurers were most
optimistic about the outlook.
                                
 Of the countries surveyed, Russia was the most optimistic,
although the climate index there declined somewhat to give a
reading of 64 compared with 72 in the previous survey. Only in
Bulgaria did sentiment improve, with the climate reading rising
by two points to 59.
                                
 As in the previous three surveys, Hungary was the most
downbeat, with the business climate slipping to 30 from 33.
                                
 The survey was first published in January 2007, and was
issued three times last year -- January, July and September. It
is now quarterly.
                                
 FOR A TABLE OF DATA, DOUBLE CLICK ON [nL0293892]
                                
 
                                
 NOTE - Distributed exclusively on the Reuters System, the
Thomson Reuters & OeKB Central European Business Climate Index
is based on quarterly surveys of 400 international companies
with regional headquarters in Austria managing 1,400 affiliate
companies in 19 countries in central and eastern Europe.