Page 7 - BNE_magazine_05_2020

bne May 2020 The Month That Was I 7
Economics
Eastern Europe
National Bank of Ukraine (NBU) slashed the key policy rate from 10% to 8% to deal with the collapsing economic growth, but only mild inflationary pressures.
Ukraine’s economy will contract
by 4.2% this year and then see an L-shaped recovery, down from the October forecast of 3.2% growth in 2020, according to Ministry of Economic Development, Trade and Agriculture estimates.
Real disposable income of Russians was down by 0.2% in 1Q20, according
to the latest data by Rosstat statistics agency. As reported by bne IntelliNews, real disposable income has been in decline since 2013, finally recovering to only 1% growth in 2019, but incomes are expected to dive again in 2020 by up to 5%.
The Central Bank of Russia (CBR) has followed its Emerging Markets peers' suit and cut rates by 50bp to 5.5% in an effort to boost growth. The bank says it will make more cuts this year as the regulator loosens the purse strings.
Russia could need up to RUB2 trillion ($27bn) of additional state borrowing for the federal budget in 2020, First Deputy Prime Minister Andrei Belousov said. Previously Finance Minister
Anton Siluanov estimated that the state support package amid the coronavirus epidemic accounts for RUB3.1 trillion (2.8% of GDP), and that RUB2 trillion will be used to cover the budget deficits from the National Welfare Fund.
Central Europe
Polish retail sales dipped 9% y/y in constant prices in March, the statistics office GUS said on April 21. The reading was the weakest since 2005. March was the first month to picture in hard data the expected crash in retail sales after Poland closed most of its retail due to the pandemic.
The National Bank of Poland (NBP) cut its reference rate by 50bps to just 0.5% on April 8 in the second easing of monetary policy in just three weeks due to the economic downturn.
The Czech unemployment rate stagnated in March, remaining at February's 3%, as anticipated by the Ministry of Labour. The number of unemployed people fell by almost 1,700 month on month to 225,678, the lowest March figure since 1997.
Hungary’s economic contraction could be deeper than the 3% estimate made in the second half of March and the 2.7% deficit target may also be revised, Finance Minister Mihaly Varga announced.
Southeast Europe
Moldova’s Constitutional Court suspended the law on the ratification of the €200mn loan extended by Russia to the former Soviet state, while a final decision on the law will be made at a later date, which opposition leaders described as “a trap.”
The International Monetary Fund (IMF) estimates a 5% decline for Romania's economy this year, followed by a 3.9% growth in 2021. Romania’s government drafted its budget for 2020 based on a 4.1% GDP growth forecast that, surprisingly, has not been revised so far.
Bulgaria’s GDP will contract 7.8% in 2020 due to the restrictions imposed following the coronavirus outbreak, but will revive and post a robust 7%
growth in 2021, according to analysis of UniCredit Bulbank. International financial institutions have projected that Bulgaria’s economy will contract by around 4% this year.
Net foreign direct investment (FDI)
in Bulgaria was €37.1mn in the first two months of 2020, versus €41.8mn in January and February 2019, according to the central bank. Foreign investment in Bulgaria has collapsed, decreasing ten times since 2007 as the country lost its attractiveness for international companies.
Business confidence among Turkish manufacturers plunged to 66.8 points in April from 99.7 in March, central bank data showed.
Turkey’s economy is widely expected to contract this year for the first time in over a decade. The median forecast of 40 economists was for a contraction of 1.4% in 2020, with declines in the second and third quarters of 8.6% and 5.3%, respectively.
Eurasia
Kazakhstan's short-term economic indicator, a narrower gauge of annual GDP growth, stood at 3.4% in March, down from 5.3% in February, according to the State Statistics Committee,
which constitute 60% of Kazakh GDP. Kazakhstan’s GDP grew by 2.7% y/y in January-March, the Kazakh prime minister’s website said.
Central Asian nations can expect GDP growth slowdowns and economic contractions due to the coronavirus pandemic in 2020, according to the IMF. Economic output in Kazakhstan and Kyrgyzstan may contract by 2.5% and 4% in 2020, respectively, down from the 4.5% growth seen in each country in 2019, while Uzbekistan, Turkmenistan and Tajikistan are expected to see their GDP growth slow to 1.8% (5.6% in 2019), 1.8% (6.3% in 2019) and 1% (7.5% in 2019).
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