EBRD economies may contract by 3.5% in 2020

Economies across the European Bank for Reconstruction and Development's regions may contract on average by 3.5% this year because of the impact of the coronavirus, with a rebound of 4.8% possible in 2021. 

The lender, in its latest Regional Economic Prospects report, warned that these projections are subject to “unprecedented uncertainty” and are based on the prospect of a gradual relaxation of domestic measures to contain the virus and a return to normality during the second half of the year. 

Almost all EBRD countries are likely to see economic contraction this year, with only a small number of exceptions, including Turkmenistan and Uzbekistan, in Central Asia, and Egypt, it said.

The report said countries in eastern Europe and the Caucasus were likely to be severely impacted by the coronavirus crisis, affected by tightening global financial markets, strong pressure on domestic foreign exchange markets and reduced foreign demand for exports. Lower commodity prices were putting additional strain on the exporters of hydrocarbons and metals – Azerbaijan, Ukraine and Armenia – while an expected drop in remittances would put pressure on household disposable income, especially in Moldova, Armenia, Ukraine and Georgia. Loss of tourism receipts will be a significant blow to the Georgian economy.

Russia was facing the double shock of the coronavirus pandemic, which has hit global demand, and the collapse of an agreement to limit oil production, which together caused oil prices to fall substantially and resulted in a sharp slowdown in activity. With its economy still dependent on oil, the fall in oil prices was significant, particularly in light of the fiscal stimulus needed to offset the impact of the pandemic. The Russian economy is expected to shrink by 4.5% in 2020, followed by a rebound of 4.0% in 2021.

Growth in Turkey is likely to be heavily impacted by the coronavirus pandemic in 2020, with GDP seen contracting by 3.5% in 2020, followed by a robust recovery to 6.0% growth in 2021.

Other economies in the region – Jordan, Morocco, Lebanon and Tunisia – are all expected to contract this year, with an especially sharp fall of 11% foreseen in Lebanon, which had already fallen into recession in 2018 and 2019.