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Coronavirus, -4.7% GDP in major CEE economies
German economy may plummet by 5.4% in the most negative scenario
30 March, 15:43
(by Stefano Giantin)
(ANSA) - BELGRADE, MARCH 30 - All major economies in Central-
and Eastern Europe (CEE) will enter a recession this year due to
the coronavirus pandemic, shows a new analysis by Erste Group
Research published today.
The least severe impact of the pandemic on the local
economies is expected in Serbia (-2.3% in 2020), while Poland
and Hungary should contract 4%, Romania and Slovakia around 5%.
The Czech and Slovenian GDP growth is set to drop 6.7%, the Croatian economy 7.5%, Erste said. On average, the growth in the region will drop by 4.7% this year, the new forecast revised down by Erste. "The current shock is broad-based, with spillover effects across sectors," Erste analysts wrote. Furthermore, "the closure of the service sector for at least month and a half will halt consumption growth in such categories as restaurants, hotels and culture" and tourism-oriented countries, in particular Croatia and Slovenia "will face a severe recession." According to the report, "income loss resulting from layoffs and lower compensations from government-sponsored schemes compared to regular wages are likely to limit household spending on durable goods and clothing" for the entire 2020. Moreover, unemployment will rise significantly, bringing consumer confidence down, while disruptions in supply chains will impact export growth. "The shape of recovery (V, U or L shaped) will depend not only on containing the virus within the country, but also domestic and global measures protecting business structures and labor markets, restoring both domestic and foreign demand in the aftermath of the pandemic," Erste said.
The impact will be negative in the region also due to the links of CEE economies to the German one, with a sharp drop of foreign demand leaving a mark on small open economies such as Czechia, Hungary and Slovakia. According to today's forecasts of the Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung (German Council of Economic Experts), an expert panel that evaluates economic policies in Germany since 1963, the German economy may shrink this year by 2.8 to 5.4 per cent, according to a more or less negative scenario due to the pandemic, but "the uncertainty around future developments due to the exceptional situation is huge," the panel said today. The panel forecasted a strong recovery in 2021, German media reported. (ANSA).
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The Czech and Slovenian GDP growth is set to drop 6.7%, the Croatian economy 7.5%, Erste said. On average, the growth in the region will drop by 4.7% this year, the new forecast revised down by Erste. "The current shock is broad-based, with spillover effects across sectors," Erste analysts wrote. Furthermore, "the closure of the service sector for at least month and a half will halt consumption growth in such categories as restaurants, hotels and culture" and tourism-oriented countries, in particular Croatia and Slovenia "will face a severe recession." According to the report, "income loss resulting from layoffs and lower compensations from government-sponsored schemes compared to regular wages are likely to limit household spending on durable goods and clothing" for the entire 2020. Moreover, unemployment will rise significantly, bringing consumer confidence down, while disruptions in supply chains will impact export growth. "The shape of recovery (V, U or L shaped) will depend not only on containing the virus within the country, but also domestic and global measures protecting business structures and labor markets, restoring both domestic and foreign demand in the aftermath of the pandemic," Erste said.
The impact will be negative in the region also due to the links of CEE economies to the German one, with a sharp drop of foreign demand leaving a mark on small open economies such as Czechia, Hungary and Slovakia. According to today's forecasts of the Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung (German Council of Economic Experts), an expert panel that evaluates economic policies in Germany since 1963, the German economy may shrink this year by 2.8 to 5.4 per cent, according to a more or less negative scenario due to the pandemic, but "the uncertainty around future developments due to the exceptional situation is huge," the panel said today. The panel forecasted a strong recovery in 2021, German media reported. (ANSA).
