A better-than-expected annual 5.3 per cent contraction of the Slovakian economy in the second quarter was hailed on Thursday as a sign that central Europe’s less troubled economies may be showing early signs of recovery.

Slovakia, the largest per capita car producer in the EU, has been hit hard by plummeting demand in Germany, its main export market, but the second quarter flash estimates were an improvement on the 5.6 per cent annual contraction recorded in the first quarter.

The signs look even more positive in Poland. The country’s current account figures, released on Wednesday, surprised on the upside, showing a surplus of €459m ($655m, £395m) in June, up from €284m in May. While its exports have slowed, imports have dropped faster.

“It does look like this could be the bottom across the region. The second half should be better,” said Juliet Sampson, chief economist for emerging Europe at HSBC.

But countries more severely affected by the initial phases of the crisis are still doing poorly.

Romania’s gross domestic product contracted by an annual 8.8 per cent in the second quarter, down from a drop of 6.2 per cent in the preceding quarter, as the country reels from the end of its recent boom, while Hungary, with some of the most troubled public finances in the region, also showed a continued decline, with GDP shrinking 7.5 per cent year-on-year compared with a fall of 6.1 per cent in the first quarter.

Despite the gloomy numbers from southern central Europe, most analysts expect the situation there to turn around in the second half of this year, especially if western Europe continues its tentative recovery and appetite for imports from central Europe revives.

In a further positive sign, the region’s currencies have bounced back sharply against the dollar and the euro in recent weeks, as investors’ risk appetite returns.

Now that the direst scenarios of earlier this year are not coming true, the question is how central Europe’s economies will fare next year. Most analysts predict a sluggish recovery, but Ms Sampson said “there could be a surprise on the upside”.

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