The economy of Central, East and Southeast Europe (CESEE) is expected to grow by 3.8% on aggregate in 2021, with most countries in the region regaining their pre-pandemic output levels by the end of this year, the Vienna Institute for International Economic Studies (WIIW) said.
The public health backdrop in CESEE should improve by late spring, as stringency measures and increased vaccine rollout allow economies to gradually reopen, WIIW said in its spring economic forecast for the region.
Across CESEE in 2021 and beyond, growth will be driven by a combination of exports of goods and services as the global economy recovers, the drawing-down of savings, better domestic sentiment as vaccination rates improve, and more fiscal and monetary support, according to WIIW.
Montenegro is projected to post a gross domestic product (GDP) growth of 6.5% in 2021 - one of the strongest economic recoveries among the 23 countries in the region. The country's economic growth will be boosted by tourism and remittances, WIIW added.
Montenegro suffered CESEE’s deepest contraction in economic activity last year, with GDP shrinking by 15.2% on the back of a steep decline in tourism revenue and the country’s limited fiscal cushion, WIIW noted.
Serbia's GDP is expected to expand by a solid 5% in 2021, supported by an excellent vaccine roll-out and increase in high-frequency indicators.
According to WIIW, Croatia will post economic growth of 4.5%, backed by EU aid. The economies of Kosovo and Albania are seen growing by 4.5% each over the medium term, the institute also said.
The economies of North Macedonia and Moldova are forecast to expand by 4.1% and 4%, respectively.
The pre-crisis level of activity in North Macedonia will be reached at the beginning of 2022, and then, when ground zero is reached, old structural challenges will come to the fore, WIIW said. As regards Moldova, the slow progress in vaccination will delay the economy's full recovery to the pre-crisis level, WIIW added.
The economies of Romania, Slovenia and Bulgaria are seen growing by 3.8%, 3.6%, and 2.5% in 2021, respectively.
Romania's economic recovery in 2021 will not be fast, owing to protracted lockdowns and austerity measures in the government budget, while the ongoing pandemic in Slovenia will dampen its economic rebound, WIIW noted. In Bulgaria, the post-coronavirus recovery is projected to be moderate, however, GDP growth is expected to be slightly higher in 2022 and 2023, WIIW also said.
The economic recovery in Bosnia and Herzegovina will be delayed due to the third wave of the pandemic, vaccine delays and the introduction of new restrictions, the think-tank commented.
WIIW also said that Turkey is expected to post a strong GDP growth this year but the growth is forecast to slow down by 2022, either due to high real interest rates to get inflation under control, or a lira collapse and balance of payments crisis.