(For other news from the Reuters Central European Investment Summit, click on http://www.reuters.com/summit/CentralEuropeanInvestment10)
* Central Europe sees benefits from currencies firming
* Portfolio inflows up but less violent
* Stronger zloty, crown, forint help on inflation * Appreciation less damaging to exports than in Asia, Latam
By Michael Winfrey and Sebastian Tong
VIENNA, Oct 13 (Reuters) - While emerging economies elsewhere in the world are struggling to halt appreciation of their currencies, central Europe is reaping benefits from currency strength.
The gradual rise of local currencies against the dollar and euro is limiting Poland's debt as a ratio of annual output, easing repayment of Hungary's foreign currency loans, and reducing inflation in the Czech Republic and across the region.
Policymakers believe currency appreciation is helping more than harming their economies, implying central Europe will not join the global "currency war" in which many countries are resisting appreciation to retain a competitive advantange for their exports.
Two central bank officials from the Czech Republic, where exports represent 80 percent of gross domestic product, said this week that they saw no problem with this year's 7.5 percent appreciation of the crown, the region's best performing currency.
"It is not so strong as to provoke a problem both from monetary policy and from exporters at this moment...not the recent move, not the level," central bank board member Kamil Janacek told the Reuters Central European Investment Summit.
He added that Czech companies could handle annual appreciation of around 4 percent against the euro every year, a sentiment echoed by central bank Governor Miroslav Singer, who also said the crown was returning to its long-term nominal appreciation path.
"Foreign trade does not give, for the time being, too many signals that the exchange rate would be unsustainable."
The crown
A strong economic recovery this year in Germany, a top export market for central Europe, is helping to limit the negative impact of currency appreciation. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphic on emerging Europe: http://r.reuters.com/kyk47p
For a TAKE-A-LOOK, click [ID:nLDE69A0OL]
For a FACTBOX on credit ratings in central Europe, click [ID:nLDE69A0S5]) ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
ZLOTY BENEFITS
Asian and Latin American policymakers are fighting a flood of incoming liquidity fuelled by ultra-loose monetary policy in major developed economies such as the United States and Japan. Thailand and Brazil, for example, have slapped taxes on foreign portfolio investment in their markets.
In central Europe, inflows have been less violent this year, because the region is more directly exposed to the euro zone's debt crises, economic growth has been slower, and governments have not yet tamed sizeable budget deficits.
In the last several months a wave of portfolio investment has begun to flood into the region, particularly into Poland, a 38-million-strong economy expected to be among the European Union's growth leaders this year.
But Polish monetary council member Elzbieta Chojna-Duch said the rise of the zloty
The zloty's firmness also suggests there is only a remote prospect of significant currency depreciation which, by inflating the value of Poland's foreign debt, could push up the ratio of its government debt to gross domestic product.
A rise of this ratio, estimated at 53.2 percent this year, to above 55 percent of GDP under local accounting standards would be politically and economically problematic because legal restrictions would trigger painful state spending cuts.
"Our calculations show that a 10 percentage slippage from the current level of the zloty could lift the public debt to GDP ratio by 1.4 percentage point," Bogdan Klimaszewski, deputy head of the finance ministry's debt department, told the summit.
In August, foreign investors' holdings of government debt grew by 11.1 billion zlotys to a record 124.6 billion zlotys. Foreign investors have increased involvement in Polish debt by 42.8 billion zlotys since January, finance ministry data shows.
"These kind of investors are good from our point of view, as they are mostly long-term investors," Klimaszewski said.
He predicted the zloty would gradually strengthen further, a view backed up by a Reuters poll showing analysts expect the currency to firm to 3.78 against the euro in the next 12 months, from around 3.96 now. [ID:nSLA6LE6EY]
HUNGARIAN MORTGAGES
Hungary is also benefitting. With around half of all household debt there denominated in Swiss francs
Having taken out loans with the forint trading at around 150 per franc three years ago, mortgage holders' monthly payments spiked when the country had to take an international bailout during the global economic crisis. The rate climbed to over 220.
But the forint has gained around 5 percent against the franc and the euro
Laszlo Wolf, deputy CEO of the country's biggest bank OTP, said non-performing loans had peaked this year.
"We don't expect further worsening because...the Hungarian forint became stronger in the last few weeks," he told the Reuters summit.
"The Swiss franc is not over 220 anymore, but it's around 200 - which is still relatively weak compared to the original level of borrowing but still much better than at 220." (Additional reporting by Krisztina Than, Jan Lopatka, Dagmara Leszkowicz and Karolina Slowikowska; Editing by Andrew Torchia)