The European Bank for Reconstruction and Development (EBRD) said it has cut its 2012 economic growth forecast for seven countries in Southeastern Europe (SEE) to an average 0.4% from 0.7% projected in July.
The EBRD also revised its 2013 forecast for economic growth in the seven countries - Albania, Bosnia and Herzegovina, Bulgaria, Macedonia, Montenegro, Romania and Serbia - to an average 1.6% from 1.7%.
"Short-term economic prospects for the SEE region are highly uncertain in the present economic climate," the EBRD said in its forecast.
According to the bank, financial sector vulnerabilities constitute the biggest risk, given that the vast majority of the banking system is foreign-owned and given the ongoing deleveraging pressures and the need to restructure bank balance sheets.
"In the first three months of 2012, several countries reported output contractions relative to the previous quarter, and while the second quarter was comparatively better and growth was positive in most countries, there is no sign anywhere of a return of the confidence and investment needed to restore growth to the region," it commented.