* Most of EU's newer members seen showing marginal growth
* Poland expected to lead pack with 2.7 pct growth
* Latvia, Lithuania seen shrinking 3.5 pct, 0.6 pct
* Hungary and Bulgaria seen achieving zero growth
By Michael Winfrey
PRAGUE, May 5 (Reuters) - A stronger than expected global
recovery will help lift most of the European Union's newer
eastern members out of recession in 2010, although some will
continue to struggle with heavy fiscal burdens.
A report released by the EU's executive Commission on
Wednesday showed Poland, the bloc's only member to avoid
economic contraction last year, would lead the pack with 2.7
percent growth this year, accelerating to 3.3 percent in 2011.
"The recovery is expected to gain momentum in 2011," it
said. Slovakia, which adopted the euro in 2009, was seen growing
by 2.7 percent.
The Czech Republic, Estonia and Romania, were expected to
show growth of up to 1.6 percent, while Hungary and Bulgaria
were expected to stagnate.
Forced to tap an EU-led bailout in 2008, Hungary is still
trying to trim its bloated public sector and reduce its budget
deficit, a factor the Commission said would weigh on recovery.
"On the basis of the economic recovery in the EU and the
rest of the world, the output of export-driven industries is
expected to accelerate faster than that of domestic-driven
sectors especially as the latter are heavily affected by the
ongoing fiscal adjustment," the Commission said.
The only economies from the former Communist bloc expected
to shrink this year were Lithuania and Latvia, with the former
down 0.6 percent and Latvia, which suffered an 18 percent
contraction in 2009, expected to decline 3.5 percent.
Inflation was seen subdued except in Hungary and Romania,
where it was seen hitting 4.6 percent and 4.3 percent this year
Central banks in those two countries have been the only two
to continue lowering interest rates in moves aimed at countering
a steep economic recession since the rest of the region stopped
an easing cycle last year.
Latvia was expected to suffer deflation of 3.2 percent.
FISCAL ADJUSTMENTS
Budget deficits remained a key concern.
The Commission saw Poland's public deficit stabilising at
around 7 percent of gross domestic product through next year
ahead of 2011 parliamentary elections, and public debt was seen
rising from 47 percent of the economy in 2008 to 59.3 percent in
2011.
It forecast Poland's debt rising almost three percentage
points to 53.9 percent of GDP this year and to 59.3 percent of
GDP if polices remain unchanged, a level that would trigger
steep public spending cuts due to a constitutional requirement
to keep debt below 55 percent of GDP.
Romania could have trouble meeting its 2010 deficit target
because of lower than expected growth this year, a higher than
expected deficit in 2009 and a big revenue shortfall in the
first quarter, the report said.
"Without further measures, the 2010 general government
deficit could reach 8 percent of GDP," the report said.
In Latvia, a large effort by the government to cut costs and
raise tax revenues had fallen short and the deficit would be
above the government's 8.5 percent of GDP deficit target, the
report said.
For Hungary, the Commission forecast a 2010 general budget
deficit of 4.1 percent of GDP, which it described as broadly
neutral in structural terms.
"Hungary has to put an end to its excessive deficit by 2011
at the latest, which implies a need for further deficit-reducing
measures at the latest next year of more than 1 percent of GDP,"
the report said.
(Reporting by Michael Winfrey; editing by John Stonestreet)
