Sept. 9 (Bloomberg) -- Eastern Europe’s economies will grow an average 0.9 percent next year, ending a recession that helped topple some governments and left others scraping for revenue, the head of Raiffeisen International Bank-Holding AG said. The expansion next year will be led by the Czech Republic, Slovakia, Bulgaria, Romania and Russia, which will post growth of more than 1 percent, said Herbert Stepic, chief executive of the Austrian bank operating in 17 former communist countries. “The countries which will emerge first from the crisis will be those which adopt a simple conservative policy,” Stepic said in an interview in Vienna yesterday. “The drivers of recovery will be different in each country as the economies are different.” The regional recovery will be as varied as the downturn, when nations such as Hungary, Bulgaria and the Baltic states plunged into the European Union’s deepest contractions while Poland escaped recession. Stepic said the revival will be sparked in part by export growth to India and China. Raiffeisen’s forecast is more conservative than one from the European Bank for Reconstruction and Development, which predicted in May that average growth for the region would be 1.4 percent next year after a slump of more than 5 percent in 2009. Budget Woes Recessions left the region’s nations struggling to shore up budgets, while those nations that are part of the EU are failing to live up to the bloc’s deficit rules after rising unemployment drained public funds and depleted tax revenue. Some countries, including Hungary, whose former prime minister, Ferenc Gyurcsany, resigned in March, will have difficulties escaping recession as the crisis was exacerbated by mistakes in domestic policy, including allowing the pace of wage increases to exceed economic growth, said Stepic. Hungary’s economy contracted 7.5 percent in the second quarter while Latvia’s GDP shrank a revised 18.7 percent in the period. The Czech Republic and Slovakia exited their recessions in the same quarter. Still, economies overall will benefit from “stabilizing domestic demand,” Stepic said. “We have a decreasing risk aversion, which means the banks are now lending to each other again and to the market,” he said. “We see increasing lending activity, even though the conditions under which they are prepared to lend are much stricter.” ERM Membership Stepic also said the Czech Republic and Poland will probably be the next countries to join the exchange-rate mechanism, the EU’s two-year currency stability test before euro adoption. Bulgaria will apply in November to join the mechanism, Finance Minister Simeon Djankov said on July 31. “The euro countries have problems themselves and they are not very much prepared to open” further membership in the system, Stepic said. “It will only happen if the crisis is over, if the major countries are reporting satisfactory growth rates and if normality came back. Otherwise I see very little chance.”

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