The Black Sea Trade and Development Bank (BSTDB) said that it expects the economy of the region to contract by 4.7% in 2020 due to the coronavirus pandemic before returning to moderate growth next year.
The Black Sea region's gross domestic product (GDP) is projected to grow by 2.5% in 2021 and by 3.0% in 2022, the bank said in a statement last week.
"In contrast to the years 2017-2019, in which each and every country of the Region posted positive GDP growth, in 2020 all of them are projected to experience negative growth. However, in 2021 the current expectation is that all twelve countries will post positive growth, even if it is moderate in some cases," the BSTDB noted.
The bank operates in Albania, Armenia, Azerbaijan, Bulgaria, Georgia, Greece, Moldova, Romania, Russia, Turkey and Ukraine, as well as in Serbia.
BSTDB’s original projection for the Black Sea region was for real GDP growth of approximately 2.4% this year. However, the outbreak of the coronavirus pandemic and the lockdowns that have constituted key public health response to contain its spread have had significant negative consequences for financial market and economic activities in the region, the bank noted.
According to BSTDB, a better-than-expected response to the pandemic and a gradual economic opening being attempted by authorities in the region raise hopes that the damage to the economies in the region will be contained and the fears about permanent damage in some sectors will not materialize.
Depending on how the pandemic plays out in the coming months, and until it is deemed to be fully under control, its revival may yet cause succeeding rounds of economic hardship. The lingering uncertainty will negatively impact new investment activity and may also be disruptive to trade, supply links, and other essential economic activities, the BSTDB said.
"Limiting the contraction to 5% will be a relative success and should lay the foundation for a stronger recovery from 2021 onwards. Under such a scenario the damage to key macroeconomic indicators would also be milder," the bank added.
The sharp fall in international commerce will reduce the current account surpluses of traditional net exporters, and the current account deficits of net importers, as import contraction will outweigh their smaller decline in exports, the BSTDB also said.
In March, the BSTDB said that it intends to refocus financing of some 900 million euro ($1.0 billion) to assist member countries' sectors and industries which are most affected by the coronavirus disease.
The BSTDB is an international financial institution headquartered in Thessaloniki, Greece. It supports economic development and regional cooperation by providing loans, credit lines, equity and guarantees for projects and trade financing in the public and private sectors in its member countries.