The European Bank for Reconstruction and Development (EBRD) made an estimated economic outlook on Wednesday, May 13, 2020, that 37 countries would be facing a sharp economic contraction due to severe impact from the coronavirus outbreak. In its forecast, the international financial institution suggested some of the European countries including Russia were expected to witness a heavy economic contraction for the year.
Sharp Contraction of 37 Economies
The EBRD, which has been tracking economic trends in 37 countries across Europe, Asia, and Africa, gave its updated forecast in its latest semi-annual economic outlook on Wednesday. In the outlook forecast, it projected that a sharp economic contraction of 3.5% for this year in these countries due to a severe decline in tourism, remittances, and commodity prices affected by the virus outbreak. The expected figure of the EBRD forecast for the 2020 GDP contraction was far malevolent than its prediction in November for a 2.9% expansion of economic outlook.
EBRD’s chief economist, Beata Javorcik told reporters, “The EBRD region, just like most of the world, is facing the greatest challenge since World War 2,” adding that “What started as a health crisis has become an economic crisis, and almost all economies in the region are expected to experience a substantial contraction this year.” Javorcik stated, however, under a scenario that would require extended social distancing, economies across the region could suffer double-digit contractions.
The forecast of the international institution was reportedly announced after taking into account of certain scenarios that foresaw a gradual relaxation of containment measures and return to normality during the second half of the year. It also considered factors including an ongoing hit to demand, especially service sectors such as tourism and hospitality.
Severe Consequence for the European Countries
Under the EBRD’s estimation, some countries were expected to suffer more than others and it would be mostly European countries that would suffer the most. Albania, a small country in the Balkan region of Europe, was expected to be witnessing one of the biggest hits as its economy was predicted to slump 9% in 2020. The country’s economy, heavy reliance on producing textiles for the Italian fashion industry, remittances, and tourism, were shaken by the virus pandemic.
Russia would be the second country whose economic contraction was expected to reach nearly 4.5% and the largest country has been widely affected due to the global oil price crash prompted by the coronavirus restrictions of travel and trade. Meanwhile, Turkey was expected to see a somewhat milder 3.5% contraction due to its lockdown focusing on weekends, following a higher share of economic activity to continue.
Central European economies such as Hungary and Poland would face their economy’s contract in line with the region because they have opened up from lockdowns in similar to Western European economies such as Germany and Austria. Meanwhile, Javorcik emphasized, although the EBRD’s prediction of a 4.8% in a rebound in 2021, there were significant risks to that forecast due to market uncertainties over the trajectory of the pandemic.
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