Oil price decline and pandemic: EBRD forecasts big drop in Belarus GDP in 2020

Economies across the regions of the European Bank for Reconstruction and Development (EBRD) may contract on average by 3.5% this year, because of the impact of the coronavirus, with a rebound of 4.8% possible in 2021.

“According to preliminary estimates, [Belarus’] economic growth turned slightly negative in Q1 2020 as manufacturing contracted by 2.3% year-on-year due to the delay in reaching a new agreement for oil and gas trade with Russia, which resulted in a disruption of oil supplies to the oil refineries in Belarus at the beginning of the year. Domestic trade is falling on the back of rising uncertainties. Extensive economic ties with Russia (accounting for 41% of exports, 56% of imports of goods and 31% of the total stock of inward foreign direct investment) make Belarus vulnerable to oil price declines and the expected recession in Russia. Meanwhile, the coronavirus pandemic will likely deepen the recession by reducing foreign and domestic demand. The output is expected to decline by 5% in 2020 and to rebound by 3.5% in 2021,” the EBRD experts and analysts say in the latest Regional Economic Prospects report.

At the same time, the projections provided in the document are subject to ‘unprecedented uncertainty’, the EBRD warns.

As for the neighbouring countries, Latvia and Lithuania may face bigger GDP drop (7%) in 2020, but the growth is projected to top %% in 2021. The EBRD expects Ukraine’s economy to contract by 4.5% in 2020, with a similar rebound of 5% in 2021.

According to the economists, the coronavirus crisis may have a more on domestic businesses and employment in Poland, the largest economy in Central Europe and the Baltic states. The Polish economy would contract by 3.5% in 2020 and grow by 4% in 2021, the EBRD report reads.

The Russian economy is expected to shrink by 4.5% in 2020, followed by a rebound of 4% in 2021. With its economy still dependent on oil, the fall in oil prices was significant, particularly in light of the fiscal stimulus needed to offset the impact of the pandemic, the experts stress.

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