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bne December 2020 New Europe in Numbers I 75
Coronacrisis to get worse before it gets better forecasts wiiw
industries and, as Astrov pointed out, "the car industry didn’t have a good time in Q2, there was a demand shock because demand for cars collapsed, and also supply interruptions within the framework of international value chains. As a result, these countries suffered over-proportionately in Q2.”
The region as a whole is forecast to expand by 3.1% next year – a recovery smaller than the 4.5% expected contraction in 2020 – and accelerate to 3.3% growth in 2022.
Bulgaria and Ukraine in particular
can expect a “subdued” recovery,
the report says, while for the major
oil producing states, “in Russia and Kazakhstan, growth will barely exceed 2.5%, as the oil prices are unlikely to recover substantially from their current levels and oil production will still be constrained by the Opec+ quotas”.
This is under wiiw’s benign baseline scenario that assumes that next year there will be an effective vaccine against COVID-19 that will succeed in containing the pandemic.
Only three economies have a chance
of bouncing back to 2019 levels of economic activity next year – Lithuania, Serbia and Turkey – while the rest of the region will only recover fully in 2022.
The exception to the gradual recovery forecast for most of the region is Belarus, which is forecast to be the only economy in the region that will not grow in 2021, due to the ongoing political turmoil in the country following the rigged August presidential election.
Clare Nuttall in Glasgow
The coronacrisis in Central, Southeast and Eastern Europe is set to get worse before it gets better as most countries in the region are heading for another contraction in Q4, says a new report from the Vienna Institute for International Economic Studies (wiiw).
“One thing is pretty clear: Q4 2020 will be bad,” said Vasily Astrov, economist at wiiw and lead author of the report "No Quick Recovery in Sight, with Coronavirus Risks Looming Large" during a webinar on November 12.
As of mid-November, coronavirus (COVID-19) cases are rising sharply across most of the region, reaching exponential growth in some countries in Central Europe and the Western Balkans.
“This has economic implications because high number of cases and hospitalisations are testing the capacity of the healthcare systems to cope, which has prompted governments
to re-impose lockdowns. Already in several countries in Central Europe
are now under full or partial second lockdowns,” said Astrov.
“These lockdowns are not as strict as those imposed in the spring but they are still enough to push economies into recession, so we forecast double- dip recessions in almost all Eastern European countries this year.”
The new wave of the pandemic comes after, broadly speaking, the CEE region did better than Western Europe during the first wave in the spring. Most countries in the region have reported fewer deaths in proportion to their population than West European countries so far, and the economic impact of the spring lockdowns was also not so deep.
wiiw economists attributed this to the relatively smaller size of the services sector in CEE economies. “The services sector is not as important on average as it is in Western Europe ... the services sector was hit the most
by the pandemic, so the fact that East European countries are less dependent on services on average played to their advantage,” said Astrov.
There are, however, some exceptions. First there are Croatia and Montenegro, which are strongly dependent on tourism and as a result suffered the steepest contractions in the region as arrivals slumped – by around 60% in Croatia and nearly 80% in Montenegro during the first seven months of the year.
The second group are the smaller Visegrad countries – the Czech Republic, Hungary and Slovakia – plus Slovenia, all small open economies that are highly dependent on foreign trade and highly integrated wth regional value chains. All four have substantial automotive
GDP growth in % and contribution of individual demand components in pp
Source: wiiw Annual Database incorporating national and Eurostat statistics, own calculation
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