Fitch Ratings said on Wednesday, July 10, it expects Emerging Europe’s growth to slow down to 2.3% this year from 2.5% in 2012 as the eurozone remains set to register a further contraction of 0.6%. Still, countries like Croatia and Slovenia are expected to sustain outright contraction in 2013, Fitch said in a statement.

It pointed out that unlike the Baltic states, which will post the highest growth rates in the region thanks to continuing broader austerity, the macroeconomic and fiscal outlook of Serbia and Croatia continues to deteriorate, while the governments remain reluctant to undertake structural reforms.

“Fiscal financing does not pose immediate concerns, but public debt/GDP ratios continue to rise,” Fitch said. It added that Serbia ('BB-'/Negative) has emerged from recession but the government has been slow to address fiscal imbalances, risking letting the public debt/GDP ratio rising to 70% by 2015 from above 60% currently.

Serbia also has been suffering from twin fiscal and current account deficits – although the second is showing signs of rebalancing with the decline in the trade gap thanks to the rising exports of Fiat’s Serbia-made vehicles.

Croatia ('BBB-'/Negative), on the other hand, risks overshadowing its recent EU accessing because of the lacking fiscal consolidation measures and continuing structural shortcomings, Fitch said.

As far as the other countries are concerned, Fitch said it sees a gradual fiscal tightening until 2015 in Russia with its new fiscal rules. Turkey, on the other hand, looks to have more room for fiscal stimulus but the political unrest and declining market sentiment might impede any actions in this direction.

Ukraine has been faced with increasingly challenging external financing position, while Hungary’s financing requirements remain high even though it managed to substitute domestic for external financing in 2012. The two states decided not to opt for new IMF deals, hoping to collect the needed funds on the market.

Romania also suffers from large foreign exchange exposures at the sovereign, corporate and household levels. Yet, it seems more amenable to a new IMF agreement and has been faster in implementing reforms, Fitch said.

It described Poland and the Czech Republic as appearing much more secure with well cover fiscal needs despite the slowing growth in the former and the political instability in the latter.