Analytics, Economics, EU – Baltic States

"Fitch forecasts gross domestic product growth to contract by 3.1% this year in "Emerging Europe: a severe and abrupt recession after growth of 4.0% in 2008 and an average of 6.8% in the five years to 2007," Edward Parker, the agency's regional chief, said in the statement.

"Moreover, it expects only a modest recovery of 1.4% in 2010, insufficient to prevent further rises in unemployment and pressure on public finances," he said.

Fitch defines "Emerging Europe" as stretching from central European EU member nations such as the Czech Republic across to former Soviet Central Asia, writes AFP/LETA.

"Growth in Emerging Europe is expected to drop more than in other regions as the characteristics of many countries – such as trade openness, prior macroeconomic imbalances and commodity dependence – leaves them relatively exposed to the major shocks that have rocked the global economy," said Parker.

Fitch, however, warned against treating the region as a "homogeneous block," saying the overall forecast masked a wide range of potential performances.

Azerbaijan, for example, is expected to post growth of 2.5%, while the economy of Latvia, the hardest-hit nation in the region, is forecast to shrink by 12.0%.

The agency said that the economies most exposed to the dramatic decline in global trade and financial flows were Hungary and Kazakhstan while the least vulnerable was Poland.

The slump will be the first to strike the region since the Russian financial crisis of 1998, when output fell by 0.5%, Fitch noted.