Page 73 - BNE_magazine_06_2020 Growers

bne June 2020
Opinion 73
Brazil and the US. The next wave of countries to succumb could be in Africa or elsewhere in the developing world.
Responses have varied widely from a total lockdown and blanket ban on going outside except for essentials (Italy, Spain, Serbia, Albania), to dismissing it as “just a little flu” (Brazil’s President Jair Bolsonaro) or touting unproven
and potentially fatal quack remedies (US President Donald Trump). One thing that has emerged, though, is that those countries that introduced strict and early lockdowns, notably the small countries across Central and Southeast Europe that are now reporting daily new cases in single figures, have been among the most successful in curbing the spread of the virus.
Even these countries, many of them small open economies and some heavily reliant on tourism, will not escape the damage inflicted on economies around the world, an inevitable consequence of shutting whole sectors down for weeks on end, on top of disruptions to international supply chains that started with the onset of the pandemic in China.
Over the past few weeks there has been a series of new sets of forecasts from international financial institutions (IFIs) and think-tanks, typically each worse than the last as global coronavirus cases continue their inexorable rise. Most project GDP contractions virtually around the world for this year, followed by a rebound to some extent next year, making
up at least some of the lost ground. Unemployment is also anticipated to spike this year, before falling somewhat – though usually remaining higher than the 2019 figure – in 2021. However, the depth of the recession, already forecast to be the worst in over a century, remains to be seen and its shape – whether a V followed by a speedy rebound, a U, an L or even a W – is still the subject of debate.
What is clear is that the economic impact from the pandemic will fall heavily on those less able to bear it. At the country level,
economists from the Vienna Institute for International Economic Studies (wiiw) said in mid-March (and reiterated in May) that the economic crisis resulting from the coronavirus pandemic will be deeper and longer in the less developed economies of the CIS, Ukraine, Turkey and the Western Balkans than in the EU member states of Central and Southeast Europe that are better equipped to deal with it. The latter group of states have better funded health systems, more resources to subsidise their economies during lockdowns and will find international capital markets more receptive to their fundraising efforts.
Another issue is unemployment. The tourism and services sectors in particular are big employers and among the worst hit by the crisis. On top of that, the poorer countries are big exporters of labour to Western Europe, and the bigger economies within the region such as Russia and Poland. As these economies shut down some of the first jobs to go were those held by migrant workers, who flocked home to sit out the lockdown.
To illustrate the scale of this migration back home, the World Bank forecasts a 27.5% slump equivalent to $18bn in remittances to Eastern Europe and Central Asia this year, twice as bad as at the nadir of the Great Recession.
This leaves an army of unemployed youths, many of whom had their horizons opened by their work abroad, but whose options for the future have now been abruptly cut off.
High unemployment and lack of economic opportunities on top of the lack of political freedoms all contributed to the
Arab Spring rebellions in the wake of the Great Recession. From their start in Tunisia in December 2010 they were closely watched in the authoritarian post-Soviet republics that had many parallels with the Arab Spring states. There followed
a series of small protests organised in Azerbaijan via social networking sites in spring 2011, while Kazakhstan also saw a months-long strike in the remote oil town of Zhanaozen that ended in deadly violence when security forces shot 16 rioters dead that December.
In general, the governments from across Eurasia are very aware of the potential for revolt, and watch developments
in nearby states carefully. Zhanozen aside, the Kazakhstani authorities in particular have been adroit in giving just enough freedom to express dissent to defuse potentially incendiary situations and avoid a crisis from escalating. By contrast, revolutions erupted in Georgia (2003), Kyrgyzstan (2005
and 2010) and Armenia (2018).
The other political phenomenon from the Great Recession was that it fuelled the already nascent rise of populism both in the new democracies of Central and Eastern Europe and in established Western democracies.
That has given rise to debate as to whether the current crisis will spell an end to populism by exposing its inadequacies – populist leaders such as Trump, Bolsonaro, President Reccep Tayyip
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