The Vienna Institute for International Economic Studies (wiiw) has recently announced that it expects the Central and Eastern Europe’s region to experience a 3.8% GDP growth as compared to its last year’s forecast of 3.1%. wiiw expects that the region‘s recovery will be strong, however, it will be delayed given the reinstitution of lockdowns from most of the countries to prevent the spread of the pandemic.
The report suggests that the recovery of the region will begin in the middle of 2021, and the situation to normalize as in pre-covid circumstances by the end of the year, with different pace among countries. Some countries of the Western Balkan are not to reach their pre-covid GDP levels up until 2022 with Montenegro not until 2023.
Overall, the CEE region did better in terms of economic growth when compared to Western Europe. However, the region was more severely hit by the second wave of the pandemic, which according to wiiw will stall the region‘s growth more than the Western Balkan.
The biggest growth is anticipated to take place in Southeast Europe, mainly in Montenegro (6.5%), Turkey (5.8%), Serbia (5%), Kosovo (4.8%), Croatia (4.5%) and Albania (4.5%), followed by Romania (3.8%) and Slovenia (3.6%). Bosnia and Herzegovina (2.5%) and Bulgaria (2.5%) are expected to have a slower recovery with growth being around 2.5% for both countries.
According to wiiw, the weakest 2021 real GDP growth to be in Estonia (1.2%), Lithuania (2.1%) and Latvia (2.8%). The CEE countries managed to better handle the pandemic than Western Europe last year, by accommodating better fiscal and monetary policies which helped them to be less reliant on the services sector.
Richard Grieveson, deputy director of wiiw, said that the “International solidarity on vaccines is going to be crucial to help the poorer parts of CESEE to exit this crisis, but unfortunately, we don’t see much of that at the moment”.
Grieveson further added that “Consumption will be the main driver everywhere in the next couple of years”, and that growth will be driven by a combination of exports in goods and services, the drawing-down of savings, better domestic sentiment, and fiscal and monetary support.
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