The coronavirus pandemic will lead to a significant contraction in output across the EBRD’s emerging economies and a swift recovery, while possible, is not guaranteed, according to the latest assessment from the Bank’s economists. The extent of the contraction and the speed of recovery will depend largely on the duration of measures to contain the virus, which even now is expected to result in the greatest disruption to global economic activity since the Second World War, according to the latest assessment of the economists of the European Bank for Reconstruction and Development (EBRD).
The crisis, according to Peter Tabak, an EBRD economist, has an impact on Serbia's economy through several channels, the most prominent of which are global supply chains and tourism.
– Global supply chains have been compromised, car factories are being closed temporarily, for how long, we don't know. Also, tourism came to a grinding halt in mid-March. Restaurants and hotels are left without income. When it comes to tourism, the biggest impact in the Western Balkans region will be felt in Albania and Montenegro, but other countries will feel the consequences also – Tabak says.
Under the EBRD’s central scenario, restrictions on cross-border and domestic activity are assumed to last for several months, with a gradual relaxation and a return to normality during the second half of the year. If this is the case, output in the EBRD regions is likely to contract in 2020, with growth resuming after lockdowns are eased.
If lockdowns remain in place for much longer, the economic impact will be significantly deeper. Prolonged quarantines and extended closures of schools and businesses may result in substantial loss of production capacity.
This would have a negative impact on the potential rate of medium-term growth and may result in deep structural damage to consumer service industries, such as airlines, cinemas and restaurants, although others, including food deliveries, may benefit.
Zsuzsanna Hargitai, the EBRD Regional Director for the Western Balkans, pointed out that the EBRD was preparing a solidarity package for countries affected by the crisis and emphasized that the EBRD continued to implement the started projects and cooperate with local self-governments.
The EBRD will issue economic forecasts for its regions on May 13.
Economy stimulus measures in Serbia
According to Tabak, the main element of the package of measures for help to the economy of Serbia is to keep employees, whereas the measure of payment of EUR 100 to each citizen of legal age will have, as he said, short-term effects.
– Support to small, medium and large companies which are keeping their workers is important, as the crisis can lead to massive layoffs. Another element is the one-off payment to citizens of legal age, which will increase the consumption, but which will have short-term effects. It is also important how those measures will be financed and to what extent the big projects will slow down.