* Czech growth surprises at 4.7 pct, vs fcast 3.8 pct
[].
* Hungarian growth slows to 0.8 pct vs 2.2 pct fcast
[].
* Slovak Q3 growth of 7.1 pct as forecast []
* Bulgarian Q3 slows to 5.6 pct from 7.1 pct [].
By Michael Winfrey
PRAGUE, Nov 14 (Reuters) - Two resilient European economies,
the Czech Republic and Slovakia, dodged the global downturn in
the third quarter with strong economic growth but Hungary veered
closer to recession and analysts expected worse numbers to come.
Investors have ditched assets in the European Union
newcomers and expect the manufacturing-heavy region to suffer,
after the euro zone, and particularly Germany -- the main
markets for its exports -- saw growth contract [].
But data released on Friday showed the Czechs and Slovaks
still holding up well last quarter, with the Czech economy
accelerating over the previous three months to 4.7 percent year
on year, well above forecasts of 3.8 percent in a Reuters poll.
Slovak growth slowed to 7.1 percent, from 7.6 percent in the
second quarter, and was in line with forecasts.
That was where the optimism ended. Hungary, which staved off
economic crisis with a $25 billion IMF/EU rescue deal last
month, expanding only 0.8 percent, versus expectations of 2.2
percent growth.
Analysts said forward looking data from the region,
including Purchasing Managers' Index numbers showing record
drops in new orders, and parallel data on Friday showing a euro
zone contraction, meant the fourth quarter would be grim.
That would be exacerbated by the credit crunch, which has
raised the cost of borrowing, pinching purchasing power of firms
and consumers at home even as the big car and electronics makers
that drive much of the region have to cut back.
"Third quarter numbers in central and Eastern Europe are not
really important as the fourth quarter is likely to be horrible
on the back of the sharp worsening of the situation in October,"
said Lars Christensen, chief economist at Danske Bank.
Markets, dominated by general gloom over growth in recent
days, showed little response to the data.
NO PLACE TO HIDE
Further south and east, fellow EU member Bulgaria saw its
growth rate slow to 5.6 percent from July to September, from 7.1
percent the previous quarter.
For Hungary -- which had only just recovered from two lean
years when last month's crisis hit -- analysts said a broad
slowing in exports, construction and consumer demand was to
blame.
The government expects a contraction next year and has
announced huge spending cuts in 2009, but it will also try to
stimulate the economy by injecting cash into small and medium
sized firms.
But producers are cutting thousands of jobs -- up to 30
percent of car industry workers are expected to go -- and the
data showed Hungary was already on the brink of its first
recession since the hard years after the fall of communism.
"This is the first time (since the early 1990s) that Hungary
will see a real downturn in the business cycle and a recession,"
said Gyorgy Barcza, analyst at KBC's Hungarian unit K&H Bank.
"Higher unemployment, and corporate defaults ... will make
2009 a painful year for Hungarians."
Analysts said while the Czech result was a good surprise, it
was possibly due to big car and electronics firms continuing to
produce goods and build up inventories despite falling demand,
rather than sacking workers and mothballing production lines.
Market watchers said one factor shielding the Czechs may
have been aggressive rate cuts by its central bank -- a luxury
not afforded to the Hungarians, who had to hike by 3 percentage
points to prop up the forint currency.
But firms like Czech carmaker Skoda and its foreign-owned
counterparts in Slovakia are shutting production lines as fewer
Germans and other west Europeans line up for new vehicles. And
analysts said the inevitable march of the slowdown was coming.
"We still expect the Czech Republic will be able to avoid an
outright recession next year, which is not the case of Hungary,"
said Ivailo Vesselinov, emerging markets analyst at Dresdner
Kleinwort.
"Growth overall will slow and that will be mainly due to
deterioration in the export sector on the back of the euro zone,
which we are expecting to shrink by 0.3 percent next year."
