Page 33 - BNE_magazine_06_2020 Growers

bne June 2020 Cover Story I 33
THE GROWERS A handful of countries in New Europe are coping
with the coronacrisis and are still expanding
bne IntelIiNews
The Central Asian economies of Tajikistan, Turkmenistan and Uzbekistan are the only countries in our New Europe region that have any chance of ending 2020 with positive growth, according to the most recent forecasts from the various international financial institutions (IFIs). Everyone else will see their economies shrink, and some by very painful amounts.
As the first quarter comes to an end other countries apart from those three resilient ‘Stans have managed to post some growth. As lockdowns were imposed later in the first quarter in most places, countries had enough momentum to keep their growth in the black – at least as far as the statistical reporting is concerned.
The breaking pandemic was even a boon for retailers, boosting their sales in March to record levels. But the effect will be short-lived. None of the countries in New Europe will be able to escape the impact of the pandemic: virtually all are set to contract in Q2 and for the full year.
The irony of the coronacrisis is that it
is the very countries that have made
the least progress reforming their economies and integrating into the global economy have found themselves best protected. In addition to the three resilient 'Stans, Russia, Bulgaria and Romania all put in positive growth in the first quarter. In Russia’s case the Kremlin has been actively pursuing autarky in anticipation of new harsh US sanctions that never appeared, but the “fiscal fortress” that President Vladimir Putin has constructed in preparation means Russia is one of the best prepared of any major economy in the world to weather the current storm.
The International Monetary Fund (IMF) anticipates positive growth of 1.8% in
both Turkmenistan and Uzbekistan, and 1% in Tajikistan, all of which are virtual pariah states that have failed to integrate themselves into the global, or even regional, economy, although Uzbekistan is now trying to undo that legacy.
The EBRD issued its latest Regional Economic Prospects report in May that projects 1.5% growth in Uzbekistan and 1% in Turkmenistan, with all the other countries across the region contracting.
Following the 2008 global financial crisis in Europe only Poland managed to maintain positive growth the following year. This time round that list could be a lot longer, depending on how fast the expected rebound is. But it is already clear Poland won’t be included in the list this time round: it is projected to contract by 3.5% in 2020 according to the EBRD.
The EBRD and IMF forecasts are broadly in line with each other and considerably more pessimistic than those the World Bank released in April.
A total of ten countries still managed to put in positive growth in the first quarter, but clearly not many of these will make it to the finish line with positive growth for the full year. However, according to the more optimistic World Bank, Armenia, Georgia, Kyrgyzstan, Poland, Romania, Tajikistan, Turkey and Uzbekistan are still in the race with a chance of making it.
Uzbekistan’s golden growth
Gold exports and growth momentum from its opening up process are expected to make Uzbekistan the top growth story in the region this year.
Tashkent’s gradual but steady economic reforms since long-time dictator Islam Karimov died in 2016 and was replaced
Bulgaria
2020 GDP Growers in first quarter
Country
1Q20
Russia
Romania
Hungary
by current President Shavkat Mirozayev have resulted in an opening up of
the economy. Investors are returning
to Central Asia’s most populous country, which also has considerable hydrocarbon and mineral wealth. While the crisis could dampen interest in planned privatisations, carried out in tandem with the overhaul of the local capital market, pre-crisis the country was already seeing strong investment growth in sectors such as retail and construction.
The country saw robust growth of over 5% per year for the last two years, and maintained a healthy 4.1% expansion in 1Q20, according to the EBRD. While the economy is forecast to contract this quarter due to a strict lockdown, for the full year the projection is for positive growth. This is despite risks including
1.6%
2.4%
2.2%
FYE20 (IMF)
Lithuania
2.4%
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-5.5%
2.4%
-4%
-5%
Poland
2%
-4.6%
Croatia
0.4%
-9%
Czech Republic
2.2%
-6.5%
-3.1%
-8.1%
Georgia
1.5%
-4%
Armenia
3.8%
-1.5%
Azerbaijan
1.1%
-2.2%
Kazakhstan
2.7%
-2.5%
Turkey
4.5%
-5%
Uzbekistan
4.1%
1.8%
Source: bne IntelliNews