EBRD cuts Europe growth forecasts on euro crisis woes

The European Bank for Reconstruction and Development on Tuesday slashed its economic growth forecasts for the ex-Soviet block, blaming the "negative impact" of the unresolved eurozone debt crisis.

The EBRD cut the growth forecast for its countries of operation to 2.7 percent this year, the London-based institution announced in its latest economic outlook.

That compared with the previous estimate in May of 3.1 percent gross domestic product (GDP) growth, and follows an impressive expansion of 4.6 percent last year.

The region is predicted to stage a modest bounce-back with 3.2-percent growth in 2013. However, that was still a downgrade from prior guidance of 3.7-percent expansion.

"The negative impact of the eurozone crisis on emerging Europe is spreading further east as lower global demand is feeding through to lower commodity prices and generally lower risk appetite," it said in a report.

"These are now having a negative impact, particularly on Russia, according to the EBRD's latest economic outlook."

Russia's economy was predicted to expand by 3.1 percent this year. That marked a major downgrade from the previous forecast for growth of 4.2 percent.

The EBRD also warned that "the biggest downside risk for the whole transition region remained a possible further deterioration of the eurozone crisis".

It added: "A timely implementation of the latest EU summit decisions may limit such risks."

Founded in 1991 to help former Soviet bloc countries such as Hungary, Kazakhstan and Russia to switch and adapt to a market economy, the EBRD is now extending its reach in the wake of the Arab Spring uprisings.

Back in May, the EBRD approved the pumping of one billion euros ($1.2 billion) into nations in the Middle East and North Africa region, at the lender's annual meeting.

The group also appointed its first British president, civil servant Suma Chakrabarti, at the meeting.