Economic growth in emerging Europe and North Africa will pick up to 3.1 per cent this year, benefiting from an easing of the euro debt crisis, development bank EBRD said on Monday.
Although slightly trimmed from earlier forecasts, the prediction by the European Bank for Reconstruction and Development is an improvement from last year's 2.6 per cent growth rate for the region under its remit.
The bank had predicted 3.2 per cent growth for 2013 in its previous forecast given in October.
"The 2013 forecast represents a marginal worsening relative to our October figure. At the same time, downside risks to the outlook have continued to recede as the likelihood of further deterioration of the Eurozone crisis diminishes," said the EBRD, which was set up in 1991 to support ex-Soviet bloc countries.
Excluding its new member states in North Africa plus Jordan, the EBRD expects 3 per cent growth.
EBRD President Suma Chakrabarti told Reuters last week that the bank's quarterly prognoses since around 2011 had pointed to deteriorating economic conditions but now emerging Europe appeared on the cusp of a growth pickup.
Eastern European economies were hit hard by the crisis in the region which accounts for most of their trade and exports and also suffered capital outflows as deleveraging Western banks cut loans and funding to many local subsidiaries.
But the euro zone picture has brightened as a Greek default has been averted and peripheral bond yields have eased thanks to the European Central Bank's pledge to support struggling member states in some circumstances.
The EBRD said cross-border deleveraging was continuing but at a much slower pace and that funding conditions were less of a problem for regional banks towards the end of 2012.
Exports, while lacklustre, no longer show an unequivocal decline across the entire region, it noted.
It warned however that, with a few exceptions, it was yet to see a consistent pickup in credit growth.
EBRD Chief economist Erik Berglof said: "It is too early to sound the all-clear but there are signs of stabilisation."
POLAND WEIGHS ON CENTRAL EUROPE
The EBRD predicted that growth in Central Europe and the Baltics, still vulnerable to euro zone shocks, will be a meagre 1.2 per cent this year, downgrading it from an expected 1.7 per cent as a slowdown in Poland weighed.
Poland was the only European Union country to escape recession after the 2008 crisis but has of late suffered a notable economic deceleration. Data on Friday showed industrial output falling for the second straight month.
The EBRD trimmed its forecast for Poland's 2013 growth to 1.5 per cent, down from October's 2.2 per cent and compared to last year's 2 per cent expansion rate.
Turkey, which slowed last year from turbo-charged 8 per cent-plus rates of 2011, is expected to grow at 3.7 per cent while Russian growth is expected at 3.5 per cent.
The fastest-growing countries in the EBRD's area of operations are Mongolia and Turkmenistan, both of which should enjoy double-digit expansion due to new copper and energy projects respectively.
At the other end of the spectrum are Hungary and Slovenia which are expected to remain in recession. Debt-ridden Hungary contracted 1.5 per cent last year and is not now expected to achieve the previously forecast 0.4 per cent growth.
The EBRD expanded last year into Egypt, Morocco, Tunisia and Jordan. Recovery, especially in Egypt, is fragile, hindered by political uncertainty, the EBRD said. But it revised up growth forecasts for the four countries to 4 per cent from a 3.8 per cent forecast in October. Growth was 2.9 per cent last year.