Emerging European economies have avoided a systemic financial and economic meltdown in 2009, credit ratings agency Fitch Ratings said in a special report, which forecast economic growth for most Eastern European countries.

Improved prospects have been driven by the huge global fiscal and monetary policy stimulus, rescue packages led by international financial institutions and the EU, and "impressive economic resilience and policy discipline", Fitch said.

However, this year's recession will prove worse than anticipated earlier, Fitch said, reducing its forecast for economic growth in emerging Europe – an area covering 20 countries from Central and South-Eastern Europe, the Baltic states and Caucasus, the Commonwealth of Independent States and Turkey.

The credit ratings agency now expects the economy of this region to shrink by 6.1 per cent, compared to 4.5 per cent forecast in its previous report in June. In Bulgaria's case, the economy is forecast to contract by 5.5 per cent.

The eurozone and the world economy are expected to shrink by 4.1 per cent and 2.8 per cent, respectively, according to Fitch.

"Major challenges remain due to the scale of the negative shocks; the costly legacy of the crisis, notably rising public debt ratios, worsening bank asset quality, lower capital inflows and weaker growth prospects; and the uncertain 'exit' from the crisis. A relapse in one of the more vulnerable countries could provide a sting in the tail, triggering ripples across the region," the ratings agency said.

Nevertheless, Fitch said that the prospects for the region's economies to recover have improved and increased its forecast for economic growth in the area covered by the report to 2.6 per cent, compared to 1.5 per cent in its June report. Bulgaria's economy was forecast to grow by 0.5 per cent in 2010 and 3.5 per cent in 2011.

"The recovery is likely to be subdued due to weak investment, rising unemployment, moderate capital inflows and credit growth, fiscal consolidation and a rebuilding of balance sheets," Fitch said.