The debt crisis in the Eurozone has prompted economists to slash growth forecasts for most of the countries in Central and Eastern Europe (CEE).

Raiffeisen Research, a unit of Raiffeisen Bank International AG (RBI), predicts that the region will witness a GDP growth of 2.3 per cent in 2012 and will close 2011 with a 3.2% GDP growth.

"The currently very uncertain situation in the Eurozone for which the leading indicators are pointing to a period of recession, while the sovereign debt crisis continues to escalate from one episode to the next also has negative ramifications for CEE," says Peter Brezinschek, head of Raiffeisen Research, in research report published October 5.

According to the analyst, the Eurozone's GDP will grow by 1.6 per cent in 2011 and just 0.2 per cent in 2012.

Brezinschek expects that the CEE region will continue its catch-up process towards the Eurozone with a positive growth differential of 1.5 to 2 percentage points until 2015.

According to Raiffeisen Research's chief analyst, CEE countries are suffering from a "lopsided export orientation", with up to 85 per cent of the region's exports going to the EU, and from the tensions within the European banking sector.

Brezinschek gives a more optimistic outlook about the CIS region, where robust domestic demand is expected to trigger a 3.6 per cent GDP growth in 2011 and a 3 per cent GDP growth in 2012.

"Compared to 2011, the CE region's average GDP growth rate should drop by one-half, from 2.9 per cent to 1.4 per cent," he forecasts.

According to Raiffeisen Research experts, the real GDP of South Eastern Europe (SEE) ) should grow by just 1.6 per cent in both 2011 and 2012.

"In contrast to 2009, even in the event of Greek debt restructuring accompanied by Draconian consolidation measures and banking system recapitalisation, we do not expect contractions in production on the order of what was seen in the wake of the Lehman bankruptcy, provided that it proves possible to prevent contagion effects by implementing measures that restore confidence on the financial markets," Brezinschek states.

The analyst believes that the partially recessionary trends will also reduce inflationary pressure in commodities and energy, which will result in an estimated 15 per cent decline in oil prices in 2012.

In his words, the trend will entail a mild decline in inflation rates in Austria and CEE.