Growth in Bulgaria, the Czech Republic, Hungary, and Slovenia is likely to be modest in 2010, ranging from 0 to 2.0%, as domestic demand remains weak, according to the estimates of the World Bank.

Half a year after Europe was shaken by a sovereign debt crisis, the recovery in the EU10 continued in 2010 and is set to strengthen in 2011, according to the World Bank's new EU10 Regular Economic Report launched today in Warsaw.

According to the report the EU10 is projected to see an expansion of 1.8% in 2010 compared to a contraction of 3.5% in 2009.

In Bulgaria, growth is largely export-driven and hence less conducive for tax collection.

In 2010, Slovakia and Poland are leading in the region with growth of 3.5% or more, helped by modest adjustment needs during the crisis, a normalization of global trade and capital flows, and — in the case of Poland — solid consumption.

Estonia and Lithuania, which undertook large adjustments during the crisis, are set for a turnaround from a contraction of around 15% in 2009 to an expansion of around 2% in 2010.

Only Latvia and Romania are projected to contract in 2010, reflecting the large adjustment needs from unsustainable domestic booms in those countries in the run-up to the crisis. Growth is set to be positive in all EU10 countries in 2011.

"Not surprisingly Poland is leading the recovery in the region with GDP growth projected at 3.5% for 2010 and 4.1% for 2011," said Kaspar Richter, Senior Economist in the World Bank's Europe and Central Asia Region and lead author of the report.

The rebound in the EU10 countries is still reliant on external demand and faces a number of risks, of which the main one is weak recovery in Europe, as prospects for exports, credit and jobs in the EU10 depend foremost on a strong recovery in the EU15, the World Bank said.

Bulgaria's gross domestic product marked a slight increase of 0.2% in the third quarter on an annual basis after adjusting to seasonal variations, the statistics institute flash estimate showed on Friday, well below analysts' forecasts.

Bulgaria, the European Union's poorest country, faced its first recession in 12 years after a three-year lending boom stalled and foreign investment dried up.

The country's gross domestic product shrank 5% last year.

Bulgaria's government has revised up to 1% its economic growth forecast for this year as recovering exports bolster the expansion.

The recovery of the Bulgarian economy, which operates in a currency board regime, is lagging behind that of other Eastern European countries.

Analysts from local think-tanks have forecast that Bulgaria's economy is likely to continue to contract in the second half of this year and may fail to return to growth earlier than next year.

The European Commission said last month that Bulgaria's economy is likely to start to recover towards the end of 2010 under the impact of the international cycle.

The International Monetary Fund expects Bulgaria's economy to grow from 0% to 0.4% in 2010.

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