On 10 August the IMF said Eastern Europe will grow by 3.3 per cent in 2010 due to rebounding exports and domestic demand.
Stuart Richards, partner at Hexam Capital Partners said he does not agree with the prediction, but says there will be a big divergence in growth rates in Eastern Europe this year.
"Russia and Turkey are likely to grow considerably higher than three per cent, certainly both of them could grow greater than five per cent this year," he said.
"Whereas if you look at the likes of Czech Republic, Hungary and Poland you are very likely to see much lower rates than 3.3 per cent."
Performance of MSCI indices over 1-yr
Source: Financial Express Analytics
Richards said both Russia and Turkey have very strong fundamentals.
"Russia has a very strong current account surplus and a very strong fiscal surplus. It has a lot of capital, which is being used to improve the infrastructure. The Russian government estimate they lose two per cent of GDP per annum because of bad infrastructure and they have the money to spend on that," he said.
"We also feel there will still be a global demand for commodities, so I think the global growth, especially coming from emerging markets, will keep up that demand for commodities.
"There is also domestic growth within Russia; so there are a lot of positive things that will stimulate growth above 3.3 per cent."
Looking to Turkey, Richards pointed to strong consumers, historically low interest rates and the fact that inflation is coming down better than expected.
"There has been a lot of pent up consumer demand over the last few year which is now being released and domestic growth rates in Turkey look promising."
Data from Financial Express shows there are 107 IMA UT and OEIC defined funds with exposure to Eastern Europe, of these 38 have exposure to both Russia and Turkey. The five best returning funds, over a one year period to 16 August, can be seen in the chart below:
Source: Financial Express Analytics
Sam Vecht, manager of the BlackRock Emerging Europe fund also believes growth will be higher than 3.3 per cent but said his growth estimates had changed recently.
"What has changed this are the fires in Russia and the drought issues and this will cut growth there," he said.
"It will definitely take growth from where I expected it to be to where the market expects it to be. I think growth will be a little bit higher than 3.3 per cent but if you had asked me four weeks ago I would have said four."
Vecht said what is interesting is the data coming in from parts of Eastern Europe that investors do not often talk about.
"What people are missing is that although there has been an export led German recovery, what is really interesting is that a lot of what the Germans export is manufactured in Hungary, Poland, Slovakia and places all around Germany. We have long talked about the attractiveness of Eastern Europe as a place of manufacture and we are really seeing that with some of the data," he said.
Looking at Turkey, Vecht admitted he had called the Turkish market wrongly.
"We were very worried about inflation coming back to hurt Turkey and it did go up but the market went up as well, which we were surprised at," he explained.
"On a single stock basis there are some interesting opportunities in Turkey. We see it not only as a play on Turkey but on parts of the Middle East such as Iraq and Syria. Turkey is benefiting very much from their growth and you can see this in terms of exports to those countries and tourists coming into Turkey from those countries. For us Turkey is a very interesting place it is the Eurasian Hub," he concluded.