The European Bank for Reconstruction and Development on Friday raised its 2010 growth forecast for the economy of the ex-Soviet bloc - a region badly ravaged by the global economic crisis. "The EBRD has revised upwards its 2010 growth forecasts for the region, reflecting a slightly faster economic recovery than anticipated last October, but with stark variation across the region," the bank said in a statement.

The 3.3-percent predicted expansion in gross domestic product (GDP) was stronger than the EBRD's earlier forecast for 2.5 percent across the countries in which the bank invests, which include Azerbaijan, Moldova and Ukraine. "The upward revision is driven by stronger than expected performance in four large economies in the region: Poland, Turkey, Russia, and Kazakhstan, on the back of stronger commodity prices, and a resumption of capital flows to large emerging market countries," the bank said. The EBRD investment zone, which comprises 30 countries and was one of the areas worst hit by the global economic crisis, shrank by six percent in 2009.

The area, which also includes Mongolia, Romania, and Turkmenistan, was forecast to grow by 3.8 percent in 2011, the London-based bank said. The group also warned that some member countries of the EBRD region would continue to suffer economic contraction this year - because they did not have a large commodity sector. "For most of the smaller countries that do not export commodities, the recovery will continue to be slow and in some cases - the Baltic countries and Hungary - we expect to see continued negative growth in 2010," it said.

EBRD chief economist Erik Berglof also said that the recovery would be "fragile" across the bank's operating region. "The recovery in the region remains fragile, with large variations across countries," Berglof said. "The gradual global recovery will support regional growth, but local factors will dampen it.

"Appropriate public and private sector policies and actions to clean up balance sheets, restructure debt and deal with distressed assets will be important to help sustain credit growth and support economic recovery." The EBRD was formed in 1991 to help former communist nations adopt market economies after the collapse of the Soviet Union. The financial crisis which erupted in late 2007 has slammed economies in central and eastern Europe - largely because many of them have relied heavily on foreign capital or high commodity prices for their economic development.

Copyright Agence France-Presse, 2010