No Quick Recovery in Sight, with Coronavirus Risks Looming Large

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Vasily Astrov, Alexandra Bykova, Rumen Dobrinsky, Richard Grieveson, Doris Hanzl-Weiss, Philipp Heimberger, Gabor Hunya, Branimir Jovanovic, Niko Korpar, Sebastian Leitner, Isilda Mara, Olga Pindyuk, Leon Podkaminer, Sandor Richter and Bernd Christoph Ströhm

wiiw Forecast Report No. Autumn 2020, November 2020
151 pages including 37 Tables, 46 Figures and 1 Box

The current report is only available to members and paying customers. Past issues become freely available online when the next report is released. Several individual sections of the report are freely available to download now (see below).

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EXECUTIVE SUMMARY

OVERVIEW 2018-2019 AND OUTLOOK 2020-2022
Premium Members only
Summary of key recent macroeconomic data for CESEE, and overview of new wiiw forecasts for 2020-2022 (Excel file)

1. Global overview: A long and bumpy road back to normality
by Richard Grieveson
A renewed spread of the pandemic will lead to increased restrictions on economic life over the winter, but by the end of Q1 2021 restrictions should again be lifted, allowing economy activity to rise. Major players will continue to engage in ultra-loose fiscal and monetary policy, providing an important source of stability and demand. The economic recovery will be bumpy, with a general upward trend punctuated by period of weakness. Risks to global projections remain unusually high in both directions.
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2. CESEE Overview
by Vasily Astrov, Philipp Heimberger and Sebastian Leitner
The recovery of CESEE economies in 2021-2022 will be sluggish and will depend on success in containing the pandemic without resort to lengthy lockdowns, as well as on the continuation of government support measures.

3.1 Convergence Monitor
by Alexandra Bykova
In 2019, the convergence process continued in almost all CESEE economies, except Turkey, Russia and Belarus; the Czech Republic and Slovenia remained top performers.
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3.2 Business cycle monitor: Widening of budget deficits cushions economic downturn
by Alexandra Bykova
Despite the negative economic fallout from the pandemic, the business cycle index continues to suggest a more positive picture than after the 2009 global financial crisis. The domestic finance sub-component was positive for 14 countries in CESEE in Q2 2020, reflecting a strongly counter-cyclical fiscal response to the downturn across large parts of the region.

3.3 Credit monitor
by Olga Pindyuk
Credit growth slowed in large parts of the region during 2020, but the lending boom continued in Turkey.

3.4 FDI monitor
by Olga Pindyuk
The most recent data show a rise in FDI inflows into CESEE, but the pandemic and its fallout could alter this trend in the coming years.

You can also buy separate country reports of this report

No.TitleAuthor 
1ALBANIA: Light at the end of the tunnel, but still far offIsilda Mara Details & Buy
2BELARUS: Popular revolt with uncertain prospectsRumen Dobrinsky Details & Buy
3BOSNIA AND HERZEGOVINA: Limited policy options restrict pandemic responseBernd Christoph Ströhm Details & Buy
4BULGARIA: Economy heading towards a slow recovery amidst continuing political unrestRumen Dobrinsky Details & Buy
5CROATIA: In the eye of the stormBernd Christoph Ströhm Details & Buy
6CZECH REPUBLIC: No V-shaped recovery in sightLeon Podkaminer Details & Buy
7ESTONIA: Government uses fiscal space to support a bounce-backSebastian Leitner Details & Buy
8HUNGARY: Next Generation EU funds crucial to avoid delayed recoverySandor Richter Details & Buy
9KAZAKHSTAN: Fiscal policy to the rescueAlexandra Bykova Details & Buy
10KOSOVO: Rising remittances limit the extent of economic declineIsilda Mara Details & Buy
11LATVIA: After the slump, heading for a well-shaped recoverySebastian Leitner Details & Buy
12LITHUANIA: Rather a dip than an economic crisisSebastian Leitner Details & Buy
13MOLDOVA: Dependent on aid from both East and WestGabor Hunya Details & Buy
14MONTENEGRO: Tourism decline drives major slump in economic growthBernd Christoph Ströhm Details & Buy
15NORTH MACEDONIA: Pandemic mishandling and inadequate fiscal support take toll on the economyBranimir Jovanovic Details & Buy
16POLAND: This time not quite a success storyLeon Podkaminer Details & Buy
17ROMANIA: Getting away with large fiscal imbalancesGabor Hunya Details & Buy
18RUSSIA: Economic losses manageable so far, but clouds on the horizonVasily Astrov Details & Buy
19SERBIA: Expansionary fiscal policy helping the economy weather the crisisBranimir Jovanovic Details & Buy
20SLOVAKIA: Second wave threatens recoveryDoris Hanzl-Weiss Details & Buy
21SLOVENIA: Weathering the storm better than expected, but will it last?Niko Korpar Details & Buy
22TURKEY: Sailing close to the wind againRichard Grieveson Details & Buy
23UKRAINE: Fragile recovery in the face of growing risksOlga Pindyuk Details & Buy
Most of CESEE withstood the first wave of the pandemic better than Western Europe. However, the medium-term outlook is hugely uncertain. After an estimated contraction of 4.5% this year, the region should grow by 3.1% in 2021 and by 3.3% in 2022, with risks clearly on the downside. Aside from the potential for further lockdowns, the pandemic will leave lasting legacies in the form of depressed demand for many services, requiring significant further government support.

 

Reference to wiiw databases: wiiw Annual Database, wiiw Monthly Database

Keywords: CESEE, economic forecast, Central and Eastern Europe, Southeast Europe, Western Balkans, EU, euro area, CIS, China, Japan, US, convergence, business cycle, coronavirus, Next Generation EU funds, private consumption, credit, investment, digitalisation, exports, FDI, labour markets, unemployment, short-time work schemes, exchange rates, monetary policy, fiscal policy

JEL classification: E20, E21, E22, E24, E32, E5, E62, F21, F31, H60, I18, J20, J30, O47, O52, O57, P24, P27, P33, P52

Countries covered: Albania, Belarus, Bosnia and Herzegovina, Bulgaria, Central and East Europe, CESEE, China, CIS, Croatia, Czech Republic, Estonia, Euro Area, European Union, Hungary, Japan, Kazakhstan, Kosovo, Latvia, Lithuania, Moldova, Montenegro, New EU Member States, North Macedonia, Poland, Romania, Russia, Serbia, Slovakia, Slovenia, Southeast Europe, Turkey, Ukraine, US, Western Balkans

Research Areas: Macroeconomic Analysis and Policy, International Trade, Competitiveness and FDI

ISBN-13: 978-3-85209-070-2


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