ECONOMIC OUTLOOK - UniCredit Sees Economic Growth in SEE Slowing Down to 4.5% in 2009

SEE countries face overheating challenges like the Baltics in view of their high current account imbalances, strong dependency of growth from international capital inflows, with a large share of foreign direct investments being directed towards the real estate or the financial sectors, and strong inflationary pressures, the group said in its report on central and eastern Europe for the fourth quarter.

"Signs of economic overheating are much less clear in SEE than they were in the Baltics," UniCredit said and added: "Moreover, the economic structure in SEE is much more diversified, with a higher share in economic activity of tradable rather than non-tradable sectors."

Monetary and credit tightening have led to a marked contraction in economic activity in the Baltics with Estonia and Latvia already in recession and Lithuania, which has a more developed industrial base, slowing down more gradually.

The real estate market in SEE is showing signs of a correction, especially in some overheated subsegments like tourism in Bulgaria or residential and commercial property market in Romania's capital Bucharest. Investment is also slowing down, while growth in consumption is impeded by a deterioration in the financial position of households and tightening access to the credit market, UniCredit said.

"We nonetheless see a smoother slowdown taking place in the region compared to the Baltic states," it added.

Following are details of UniCredit's macroeconomic forecasts for SEE through 2010:

BULGARIA

BOSNIA AND HERZEGOVINA

CROATIA

ROMANIA

SERBIA

SLOVENIA

Slovenia entered the European Union in May 2004, Bulgaria and Romania joined the bloc in January 2007, and Croatia started EU accession talks in October 2005 and hopes to join around 2011.

Serbia signed a Stabilisation and Association Agreement (SAA) with the 27-member bloc, the first formal step towards membership, in May. Bosnia signed a SAA with Brussels a month later.