(Repeats to additional subscribers)
By Sujata Rao
LONDON, May 15 (Reuters) - Central and Eastern Europe faces
at least another year of economic difficulties and there are
signs at best of stabilisation rather than recovery, regional
policymakers and business leaders said on Friday.
Speaking at the annual meeting of the European Bank for
Reconstruction and Development, delegates and EBRD officials
said there were some signs the worst of the credit crisis may be
over but any stabilisation would be slow and setbacks possible.
"We are now predicting a slow 'bottoming out' of the
recession this year followed by the beginnings of recovery in
2010," EBRD President Thomas Mirow said in a speech to be
delivered later on Friday.
But he was also quoted as saying underlined there were "big
caveats" to that, and the bank's chief economist underlined any
recovery will not be quick.
The IMF last month slashed its forecasts for the region's
economies, predicting double digit contractions for the Baltic
states and a slide into recession even for economies, like
Poland, which have been most resilient in the crisis so far.
Both the EBRD and IMF see some of the region's biggest
economies -- notably Poland and the Czech Republic -- returning
to minimal growth next year. But that remains a poor result
compared to years of booming expansion and private sector
bankers attending the conference were much gloomier.
"I am very far from saying we are seeing a turnaround," said
Herbert Stepic, chief executive at Austrian bank Raiffeisen
International, which has extensive business in eastern Europe.
"The real downturn is starting now. We are coming to the
real deep crisis in the real economy," he said.
Stepic said the toxic structured credit assets affecting
global banks were not a major problem for east Europe's banks
but that recession this year would be a bigger issue.
NO OBVIOUS SOLUTION
Burdened by high external deficits and with trouble
borrowing in the global credit crunch, the eastern Europeans
have mostly steered clear of the fiscal stimulus used by major
western economies.
Indeed, most have opted to cut spending, either on their own
or as part of deals with the International Monetary Fund. Many
of the region's western-owned banks have been pressing for
governments to do more to shore up the financial sector.
Georgy Suranyi, regional chief for Italian bank Intesa
Sanpaolo and a former Hungary central bank chief, said he was
worried that fiscal and monetary policies being adopted across
the region could exaggerate the downturn.
"Most of them, except perhaps the Czechs responded
pro-cyclically which will cause an even deeper recession (in
coming months)," he said.
This year's annual meeting of the EBRD, set up in 1991 to
help former communist countries of the region in their
transition to market economies, is the first since the global
credit crunch savaged many economies in eastern Europe.
The crisis -- exaggerated by the fact that many banks in
region were owned by ailing western European parents -- forced a
freezing of credit, several bailouts by the International
Monetary Fund and a severe economic slowdown.
Data released on Friday showed regional economies shrank
faster than expected in the first quarter after imploding demand
in key export markets hit industries, while weak GDP data from
key export market Germany leaves a grim near-term outlook.
Hungary's economy contracted by an annual 6.4 percent, the
biggest fall since the country began publishing quarterly
figures in 1996, and more than the 5.9 percent drop analysts had
expected, data showed on Friday.
Neighbouring Slovakia, which had one of the highest growth
rates in the European Union in the past few years, posted a 5.4
percent annual fall in real GDP compared with 2.5 percent growth
in the last quarter of 2008.
The Czech economy fell by 3.4 percent while the Romanian
economy shrank by an annual 6.4 percent in the first quarter,
more than double the pace economists forecast.
The EBRD is currently forecasting a 5.2 percent contraction
this year of the entire region it operates in -- which includes
non-EU countries further east.
Regional policymakers said they would try to get through the
crisis as best they could without the need for external help.
"Currently we are able to do it by our own. But we also have
to think about our future prospects and of course if additional
risks appear we (could go to) the European Commission,"
Lithuania's Finance Minister Algirdas Semeta, told Reuters at
the EBRD meeting
Czech central bank governor Zdenek Tuma bemoaned the lack of
support from western European institutions.
"I believe the European institutions can be more active...
for instance... if Poland had a swap with the ECB, it probably
wouldn't have applied for the (IMF) flexible credit line... The
ECB doesn't want to do that (provide swaps)."
"It's a question for the ECB and the European Commission in
which they can be more active."
(Writing by Mike Dolan; editing by Patrick Graham)
