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updated: 1/21/2013 7:31 AM

East European slowdown is bottoming out, development bank says

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Bloomberg News

Eastern Europe's economic-growth prospects are improving because of the European Central Bank's efforts to resolve the continent's debt crisis, the European Bank for Reconstruction and Development said.

The 29 eastern European and central Asian countries where the EBRD invests will expand 3 percent this year after estimated growth of 2.6 percent in 2012, the London-based bank said today in an e-mailed statement, revising October forecasts of 3.1 percent and 2.7 percent. The region's gross domestic product rose 5 percent in 2011.

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"Signs of stabilization in the euro zone are reducing the risks facing emerging Europe, leading to cautious optimism that the worst of the transition region's problems may slowly be drawing to a close," the bank said in the statement. "The deceleration is showing signs of bottoming out."

Eastern Europe has suffered as tighter capital rules forced western European banks with units in the region to cut funding and sell assets. Trade with neighbors in the continent's west has also fallen as the euro area grapples with a recession.

While the pullback by western lenders has continued, the pace is now "much slower," while the decline in exports moderated toward the end of last year and "modest private capital inflows" have returned, the EBRD said.

Egypt, Morocco, Jordan and Tunisia, where the bank is starting to lend as part of an expansion, will grow 4 percent this year compared with 2.9 percent in 2012, the bank said.

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