(Updates with Almunia's news conference)
By Marcin Grajewski
BRUSSELS, Nov 3 (Reuters) - Poland, the Czech Republic and
Slovakia will weather the global financial crisis relatively
well but the Baltic republics and Hungary will be hit hard, the
European Commission said on Monday.
The European Union executive's twice-yearly forecast
highlighted growing economic divergences in ex-communist Central
and Eastern European states that joined the bloc in 2004-2007,
most of which have yet to adopt the euro currency.
Presenting the forecast, EU Monetary Affairs Commissioner
Joaquin Almunia said the crisis had made joining the euro zone
more attractive for Poland and other countries, but noted no
state would meet the relevant criteria by spring 2010.
"This financial crisis ... has created a new awareness about
the risk of not being a member of the euro area. So I look
forward for renewed political will to prepare the economies of
non-euro area countries for joining the euro area," he said.
The Commission slashed economic growth forecasts for Poland,
the Czech Republic and Slovakia, but their economies are still
expected to expand next year and in 2010 at a healthy pace
compared with the euro zone.
However, Estonia, Latvia and Lithuania will plunge into
recession, accompanied by high inflation and widening budget
deficits, complicating their efforts to join the euro zone.
Hungary, forced to seek International Monetary Fund and EU
help after the crisis hit it hardest among the bloc's members,
is expected to expand by 0.7 percent in 2009.
But Almunia said his forecast was made before Hungary had
announced its latest prediction of a 1.0 percent economic
contraction next year.
SLOWER GROWTH BUT STILL HEALTHY
Poland's growth forecast was revised down to 3.8 percent in
2009 from an earlier 5.0 percent, that of the Czech Republic to
3.6 percent from 5.0 percent and that of Slovakia, which is to
join the euro zone in 2009, to 4.9 percent from 6.2 percent.
The euro zone's economy is forecast to grow a mere 0.1
percent next year and by 0.9 percent in 2010.
"The Polish financial sector, which is dominated by
universal banks with a strong deposit base, has proved to be
resilient to the global financial crisis, but some small and
medium-sized banks are depending on foreign financing, making
them vulnerable to external developments," the Commission said.
The Commission said Poland's budget deficit is forecast to
stay below the EU's cap of 3 percent of gross domestic product
until 2010. EU-measured annual inflation is to fall to 3.5
percent in 2009 and to 2.6 percent in 2010 from 4.3 percent
expected this year.
The figures augur well for Poland's target of joining the
euro zone in 2012, although the country will face other
obstacles such as passing the stability test of its currency.
"I really welcome the roadmap as the political intention
that has been communicated recently by the Polish government,"
Almunia said.
By contrast, the Baltic republics are expected to fall into
recession after their foreign-financed economic boom ended even
before the financial crisis.
Latvia's economy is expected to contract most, by 2.7
percent next year before expanding 1.0 percent in 2010.
Lithuania's growth will grind to a halt next year and turn to
-1.1 percent in 2010. Estonia is to shrink 1.2 percent in 2009.
Some analysts and diplomats say privately that some of the
Baltic countries may have to turn to the IMF and EU for
financial help in the same way Hungary did last month.
For Hungary risks are high, after the global crisis coupled
with a high budget deficit triggered sharp falls in currency and
stock markets.
"Should the financial turmoil turn out to be more serious,
or should the authorities adopt additional austerity measures as
currently discussed, the slowdown will be more pronounced and
the recovery will be even more protracted," the Commission said.
The Commission also expressed concern about Romania and, to
a lesser degree, Bulgaria, saying growth was set to slow.
"Romania's economy is overheating, but growth is set to slow
down," it said.
(Editing by Dale Hudson)
