Analytics, Economics, EU – Baltic States, Financial Services

Industrial production contracted at a slower pace in Hungary, the Czech Republic, Romania, Latvia, Lithuania and Slovakia in June, helping the Slovak and Czech economies to grow last quarter from the first three months of the year.

"These are definitely green shoots," Raffaella Tenconi, a Prague-based economist at Wood & Co., said in a phone interview. "For 2010, there's definitely mounting evidence that GDP projections will be revised upwards."

Eastern Europe's export-reliant economies need a western European recovery to revive their manufacturing sectors and spur job growth. After Germany and France exited their recessions last quarter, prospects have brightened for a resurgence of demand that might help the region's emerging economies expand.

"We see a good chance that the economic decline has already bottomed out in the region," said Laszlo Bencsik, the Chief Financial Officer at OTP Bank Nyrt., the Hungarian lender with units in Bulgaria, Croatia, Montenegro, Romania, Russia, Serbia, Slovakia and Ukraine.

The second quarter may have been the worst for most of the region's economies.

Hungary, Latvia and Romania have the added burden of meeting budget deficit targets set by the International Monetary Fund, which provided emergency loans to the countries to help them finance their deficits.

"There are signs of easing though it's still quite a grim economic picture overall for eastern Europe," Oxley said in a phone interview. "It's too early to talk about a return to sustained growth."

Oxley forecasts quicker recovery for Poland and the Czech Republic and a protracted road back to growth for Hungary, Romania and the Baltic states of Estonia, Latvia and Lithuania, where he said budget constraints are tighter.