May 7 (SeeNews) - The Vienna Institute for International Economic Studies (WIIW) expects Croatia's economy to be the worst hit by the coronavirus crisis among 23 countries in Eastern Europe, it said.
The biggest real gross domestic product (GDP) contractions in 2020 are expected to be in Croatia, by 11%, Slovenia, by 9.5%, Slovakia, by 9% and Montenegro, by 8%, reflecting these countries’ particularly heavy reliance on external trade and/or tourism, WIIW said in a statement on Wednesday.
On the other hand, the least severe GDP contractions in 2020 will be in economies that are less reliant on external trade and tourism such as Kosovo, (-4.4%) or Moldova (-3%), and/or are likely to use significant fiscal resources to counteract the downturn such as Serbia (-4%), WIIW said after the publication of a May 2020 interim forecast update report.
The downside risks to WIIW's projections are quite significant as the reliance of many Western Balkan countries on large-scale capital inflows could cause substantial stresses, while remittances, foreign direct investment and portfolio inflows will contract sharply this year, the institute said.
The role of international institutions such as the International Monetary Fund (IMF) and the European Bank for Reconstruction and Development (EBRD) will be crucial in helping them to manage the downturn, WIIW added.
The weighted average real GDP of Eastern Europe is expected to decline by 6.1% in 2020, compared with 5.6% in 2009, making this the worst year for the region since the early 1990s. The initial recovery of the region will then be much weaker: 2.8% in 2021, compared with 4.4% in 2010, WIIW said.