East European economies have weathered the global credit crunch so far, but they are becoming increasingly vulnerable and governments must tighten fiscal policy to avoid overheating, said Christoph Rosenberg, Senior Regional Representative Central Europe and Baltics at the IMF during his presentation at the Reuters Central European Investment Summit.

Recent events also highlighted downside risks for the region, said Rosenberg.

In its a report on the world economic outlook published on Wednesday, the IMF said it had revised downward all of its 2008 GDP forecasts for EU members in east Europe, with the exception of Lithuania which remained unchanged.

To read more from Rosenberg on eastern Europe, click here. If you want to read a story on the latest IMF report, click here.

This cartoon from The Economist illustrates for Christoph Rosenberg, IMF Senior Regional Representative Central Europe and Baltics, most aptly what the situation looks like for Europe’s new member states in the region.

Especially when it comes to fiscal policy, there is still a bit of work to do, Rosenberg told the Reuters Central European Investment Summit, also giving his wish list on policy issues. Meanwhile, the whole debate surrounding the adoption of the euro currency was very much focussed on countries meeting the Maastricht criteria and less on how the new member states could actually improve their economies to do well in the bloc, said Rosenberg.

Are oil prices hitting a record high at $88 per barrel a good or a bad thing for an oil company?  

Well, for OMV — which has more conservative price estimate — it means that the company should see a positive effect on earnings, OMV Chief Executive Wolfgang Ruttenstorfer told the Reuters Central European Summit.

Yet it also could bring about a fierce battle on the cost side over the next two years.

To read a story on Ruttenstorfer’s take on recent oil price developments, click here. If you want to read the latest about OMV’s takeover battle for Hungary’s MOL and what MOL had to say, click here.

Energy and telecommunications will lead merger and acquisition activities in eastern Europe over the next year. Willi Hemetsberger, head of global markets at UniCredit told the Reuters Central European Investment Summit.

And both western and eastern European companies will drive be the drivers for consolidation, said Hemetsberger.

For a story on Hemetsberger speaking of opportunities in Turkey, click here.

A slipping of the euro adoption agenda does not harm the attractiveness of the European Union’s new member states to private equity firms, Thierry Baudon, managing partner at private equity firm Mid Europa Partners, told the Reuters Central European Investment Summit.

Yet there are different trade-offs for smaller and bigger countries.

Most interest rate-setters on Poland’s Monetary Policy Council are ready to act immediately if needed and don’t believe in a “wait and see” approach, MPC member Dariusz Filar told the Reuters Central European Investment Summit.

Filar also said it was unclear how many more interest rate hikes would be needed by March 2008 and said the period until then was “extremely delicate” for the council.

If you want to read a story on Filar’s comments, click here.

Slovak EU-norm inflation has picked up more than expected due to food price growth but there is no big need to tighten monetary conditions, central bank (NBS) board member Ludovit Odor told Reuters Correspondent Peter Laca during the Reuters Central European Investment Summit.

Odor says he saw no huge need to tighten monetary policy conditions very much because he thought they were ”close to some optimal level at this stage”.

Slovak EU-norm inflation jumped to 1.7 percent on an annual
basis in September, from a historical minimum of 1.2 percent
booked in both August and July, above market expectations of a
1.6 percent rise.

Hungary’s OTP bank is on track to meet its 2007 profit target, although one might want to account for a 2-percent margin of error, Chief Financial Officer Laszlo Urban told the Reuters Central European Investment Summit.

The Serb and Russian units at the bank — one of the biggest listed firms in central Europe — were performing under target but a management revamp at the Russian unit means it could regain lost ground in the third quarter, said Urban.

 The recent global credit crunch has turned up the heat on small banks in Russia, which could present opportunities for OTP, the Hungarian bank’s Chief Financial Officer Laszlo Urban told the Reuters Central European Investment summit.

OTP remains in the market for a small Russian regional bank and expects to spend $50 million on an acquisition which could be announced as early as this year, said Urban.

While others will also be looking for targets in Russia, there will be enough for everyone, said Urban.

To read the full story on OTP’s acquisition plans, click here. 

Poland’s credit rating has been constrained by its uncertain political outlook, a lack of reforms as well as the need for more fiscal consolidation and for tackling the system of social security, Standard and Poor’s credit analyst Kai Stukenbrock told the Reuters Central European Investment Summit.

But if Sunday’s vote would lead to a government that was decisive and ready to tackle those issues, Poland could see an upgrade in the medium term to its current A/minus foreign and local currency debt rating.

Conservative Prime Minister Jaroslaw Kaczynski faces a tough
challenge in the Oct. 21 election from the main opposition
party, the centre-right Civic Platform (PO). Unless winning an
outright majority, the conservatives may lose power if the
pro-business PO and the centre-left form a coalition.
To read a story on Poland’s credit rating potentially getting a boost, click here.

Stukenbrock also said that Slovakia would likely adopt the euro in 2009 and that S&P was unlikely to up its rating on Hungary soon.