GENEVA, Nov 14 (Reuters) - Growth across eastern Europe and the former Soviet states should be four percent in 2003 after an expected 3.75 percent this year, despite the global slowdown, a United Nations agency forecast on Thursday.
The U.N. Economic Commission for Europe (ECE) said growth in the transition economies slowed to an average 3.6 percent in the first half of 2002, from five percent in 2001, due to the weak economic performance elsewhere, particularly in Western Europe.
But the 27-country region was still poised to remain "among the fastest growing regions in the world" in 2002, the agency said in its semi-annual Economic Survey of Europe.
The ECE warned, however, that a shift away from export-led to domestically-driven growth left the region, which is emerging from decades of state-managed economies, in a "vulnerable position," especially as unemployment remained high.
"It is unlikely that these economies -- especially the countries in eastern Europe and the Baltic region -- will be able to escape for long the negative effects of a protracted weakness in the global and west European economies," ECE chief Brigita Schmognerova, a former Slovak finance minister, said.
Excessive reliance on domestically-driven growth cannot be a viable medium-term strategy for the majority of the transition economies, "with the possible exception of Russia," the Geneva-based agency said.
RUSSIA'S PROSPECTS GOOD
Russia's gross domestic product (GDP), boosted by higher oil prices and stronger domestic demand, is likely to expand by four percent or more in 2002, and grow even faster next year if crude prices remain strong, it said.
This was down from five percent growth in 2001 and a far cry from nine percent in 2000.
Rumen Dobrinsky, chief of the transition economies section at the ECE, said Russia had staged a "quite remarkable recovery" since the 1998 crisis due to the rouble's depreciation, a rise in global oil prices and progress in market reforms.
"Overall, the prospects for the Russian economy are fairly good although it is not realistic to expect the extremely high rates of growth that were seen two or three years ago," Dobrinsky told a news briefing.
Aggregate GDP in the 12 CIS countries is forecast to rise by 4.5 percent this year and 4.25 in 2003, according to the report.
"Overall, one could say that the CIS has overcome the transitional recession -- which in some countries lasted very long, almost a decade -- and now has entered a phase of recovery which is prevailing in the whole region," Dobrinsky said.
The strongest performers among CIS states, oil-exporting Azerbaijan and Kazakhstan, are forecast to post growth this year of 8.5 percent and from seven to eight percent, respectively.
The three Baltic states (Estonia, Latvia and Lithuania), should post average GDP growth of five percent this year, rising to 5.25 in 2003, making them the fastest growing subregion.
"The average rate of GDP growth in eastern Europe -- which is heavily influenced by Poland -- is expected to be 2.5 percent in 2002, improving to 3.75 per cent in 2003," it said.
Poland, in a "state of near stagnation" since the second quarter of 2001, should post growth of at least one percent this year and more than three percent in 2003.
The Czech Republic, hit hard by floods last August, should see 1.5 to 2.5 percent growth this year, accelerating in 2003.