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OUTLOOK 2021 Lithuania
EBRD says loan to Estonia’s controversial Porto Franco project was never disbursed
Czech MPs pass protectionist food law in violation of EU rules
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OUTLOOK 2021 Poland
OUTLOOK 2021 Slovakia
BRICKS & MORTAR: Rosier future beckons for CEE retailers after year of change and disruption
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BALKAN BLOG: US approach to switch from quick-fix dealmaking to experience and cooperation
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OUTLOOK 2021 Moldova
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Montenegrins say state administration is most corrupt institution
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OUTLOOK 2021 Romania
OUTLOOK 2021 Slovenia
Slovenia’s opposition files no-confidence motion against Jansa cabinet
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Turkey’s benchmark rate held as concerns over faltering recovery come to fore
Turkish lira breaches HSBC’s stop-loss, Turkey ETF signalling outflows
CAUCASUS BLOG : What can Biden offer the Caucasus and Stans, all but forgotten about by Trump?
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OUTLOOK 2021 Armenia
COMMENT: Record high debt levels will slow post-coronavirus recovery, threaten some countries' financial stability, says IIF
OUTLOOK 2021 Georgia
Iran’s Khamenei menaces private citizen Trump with image of aircraft shadowing blond golfer
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TEHRAN BLOG: Will Biden bet on a quick return to the Iran nuclear deal?
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OUTLOOK 2021 Tajikistan
OUTLOOK 2021 Turkmenistan
Turkmenistan: How the Grinch stole New Year
COMMENT: Uzbekistan is being transformed, but where are the democratic reforms?
Download the pdf version
A new monitor from the European Bank for Reconstruction and Development (EBRD) reveals that numerous states from the Central, Eastern and Southeast Europe and Eurasia regions are highly vulnerable to external shocks in a variety of areas.
Specifically, the EBRD looks at the resilience of states in the region to falling commodity prices, value chain disruption and a decline in tourism and remittances, as well as assessing their economies’ resilience to domestic disruption.
Not surprisingly, the main oil and gas exporters in the region — Kazakhstan, Turkmenistan, Azerbaijan and Russia — are vulnerable to commodity prices shocks, as are Mongolia and Tajikistan, which rely on metals and mining, and to a lesser extent Kyrgyzstan, Uzbekistan and Armenia.
On the other hand, the main hit to the economies of Central Europe relates to their integration into global value chains.
For Albania, Croatia, Montenegro and Georgia, the biggest threat is from the almost total shutdown of their tourism sectors, as hotels and restaurants are closed and flights grounded. In all four countries tourism accounts for a quarter or more of GDP.
The poorer countries in the region depend heavily on remittance inflows, in particular Kyrgyzstan and Tajikistan, though to a lesser extent also Moldova, Ukraine and some countries in the South Caucasus and Western Balkans.
When it comes to domestic shocks to the economy — specifically those related to the lockdowns aimed at preventing spread of the coronavirus (COVID-19) — the EBRD writes that "demand-side economic effects are likely to be larger in countries where retail services account for a greater share of GDP, as in Lithuania, Poland, Cyprus, Montenegro and Turkey. Effects are also likely to be larger where temporary restrictions on work result in significant income losses: for instance in Central Asia, the Caucasus and the southern and eastern Mediterranean.”
The EBRD also looks at countries’ ability to implement fiscal measures to support vulnerable individuals and companies. This will depend on existing levels of debt and fiscal deficits as well as the cost of borrowing in the market, the development bank says.
“Fiscal space is already limited in many countries, in particular in the Caucasus, Central Asia and the southern and eastern Mediterranean. External financing needs are already high relative to reserves in several economies. Financial systems may also come under greater pressure in countries with already high levels of non-performing loans,” says the report.
Montenegro, which has already borrowed heavily for infrastructure investment, has the least fiscal space among the Central and Southeast European countries.
To assess the ability of countries’ healthcare systems to respond to the coronavirus pandemic, the EBRD compares public health spending as a share of GDP and the number of physicians per 100,000 of the population.
“The coronavirus is placing countries’ healthcare systems under unprecedented strain, while domestic containment measures are weighing on both supply and demand,” it comments.
Worryingly, the monitor “shows that public-sector health spending in the EBRD regions is far below that in advanced economies, with typically fewer doctors per population, in particular in the lower-income economies.”
Public health spending is particularly low in Tajikistan and Turkmenistan — both of which claim they so far have no coronavirus cases at all — and in parts of the South Caucasus.
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