The European Bank for Reconstruction and Development (EBRD) predicts that the economies of its member countries will grow 4.2 percent in 2021 amid economic recovery after the COVID pandemic, Report informs referring to the EBRD’s June Regional Economic Prospects report.
The document examines the situation in 38 emerging market economies. The current forecast has improved compared to the one that was published in September last year. The bank, which is headquartered in London, expected GDP growth of the countries by only 3.6 percent.
According to the EBRD, the economic recovery is boosted by growth in industries such as the manufacturing and retail sector, which have been hit hard by the pandemic.
“The increasing rollout of vaccination programs and improvements in the public health situation has allowed for a gradual withdrawal of social distancing measures and other restrictions. As a result, economies have restarted: Industrial production and retail sales have largely recovered, and the average mobility of people in the regions where the bank invests has mostly returned to pre-pandemic levels,” reads the document.
In 2022, according to the EBRD, the economies of emerging countries will continue to develop actively. Their growth will be 3.9 percent.
However, despite the improved forecasts, EBRD Chief Economist Beata Javorcik is confident that the risk of uncertainty due to the pandemic is still very high.
“Although the revised forecasts give reasons to be optimistic, huge uncertainty remains regarding the path of the Covid-19 Delta variant, which poses particularly large risks for countries that have made less progress on vaccinations and for economies highly reliant on international tourism. The picture for 2020 is diverse. While several countries in central Europe and the Baltic states performed well compared with many advanced European economies thanks to a strong rebound in exports of goods, economies heavily reliant on tourism were hard hit. And in countries afflicted by challenging economic circumstances prior to the pandemic, Covid-19 only compounded existing problems,” she said.
Furthermore, fiscal vulnerabilities have increased as large stimulus packages have boosted public debt in the EBRD regions by an average of 11 percentage points of GDP. “In many economies, public debt is now at levels last seen during the transition recession of the early 1990s and may rise further. While bankruptcies have so far remained contained owing to extensive policy support, vulnerabilities may surface when government support measures are withdrawn,” reads the report.
Considering the situation separately by region and country, the average growth rates in the states of Central Asia (Kazakhstan, Kyrgyzstan, Mongolia, Tajikistan, Turkmenistan, and Uzbekistan) in 2021 and 2022 will be 4.5 percent each. This is 1.3 and 3.7 p.p. (percentage points) higher than in the previous report. The bank’s experts expect the most active growth this year in Kyrgyzstan (6.6 percent).
The EBRD predicts that in Central Europe and the Baltic states (Hungary, Latvia, Lithuania, Poland, Slovakia, Slovenia, Croatia, Czech Republic, and Estonia), GDP should grow by 4.8 percent this year and by 4.6 percent in 2022. This means an improvement in the September forecast by 1.3 and 0.7 p.p., respectively.
The economies of Eastern Europe and the Caucasus (Azerbaijan, Armenia, Belarus, Georgia, Moldova, and Ukraine) are expected to grow 2.8 percent in 2021 and 3 percent in 2022. For the current year, this is 0.2 p.p. better than expected, and for 2022 it is 1.1 p.p. worse.
In Southeast Europe (Bulgaria, Greece, Romania), average growth is expected to reach 5.2 percent in 2021 and then decline to 5 percent in 2022. In the southern and eastern Mediterranean countries (Egypt, Jordan, Lebanon, Morocco, and Tunisia), the bank expects economic growth at an average level of 3.5 percent, followed by a GDP growth of 4.6 percent.
For the Western Balkans (Albania, Bosnia and Herzegovina, North Macedonia, Serbia, Montenegro, and unrecognized Kosovo), the EBRD’s projected GDP growth is 5.1 percent, followed by 3.8 percent growth. Turkey’s economy is set to grow 5.5 percent in 2021 and 4 percent in 2022.
The bank works with 39 countries in total, including states from Central Europe to Central Asia, the countries of the Southern and Eastern Mediterranean, the West Bank, and the Gaza Strip. The EBRD continues to manage its portfolio of projects in the Republic of Cyprus without direct investment there.