An economic slowdown resulting from the coronavirus (COVID-19) pandemic along with troubles in the tourism, hospitality and transport will erode both public finances and corporate financials and may entail a financial crisis, the president of the Black Sea Trade and Development Bank (BSTDB) said.
"Finally, we may have to deal in the second half of this year or next year with a financial crisis. Economic activity is easier to stop than to reboot and restart. It will take time," Dmitry Pankin was quoted as saying in a press release by BSTDB on Monday.
According to Pankin, the crisis caused by the COVID-19 is likely to be the sharpest economic contraction in history since the Great Depression. The recovery of the economy depends on how long the lock-down will last, on the damages to supply chains and public finances, and whether consumer demand will have short or long term effects.
"If the pandemic recedes by the end of June, there are good chances to see a rapid and steep recovery with economic and financial activity returning to normal within the following 12 months," the BSTDB president opined.
Even though the sectors of transportation, hospitality, and tourism were most hit by the COVID-19 crisis, the operations of international financial institutions (IFIs), on which the affected businesses rely in such times, are also suffering the negative effects of the pandemic, he noted.
"IFIs, if their mandate permits and to the extent of their own capability, attempt to first continue to serve their clients and second to adopt exceptionally measures aimed at supporting SMEs, health authorities, manufacturers of medical equipment and of medicine, utility companies, and the like, with a view to support governments’ efforts to protect the most vulnerable," Pankin said. "But we need to acknowledge that such a sudden and intense shock affects everybody, including IFIs whom also have to put first the health and safety of their own staff, safeguard the interests of shareholders, and under globally stressed financial conditions to ensure business continuity."
Despite the severity of the current situation, Pankin is remains optimistic.
"If the coronavirus health pandemic is resolved quickly with minimum of human suffering, the positive of it is that all excess liquidity has been destroyed and all bubbles have burst. So we may talk about a fresh beginning without the burden of imbalances that threatened the financial sector," he commented.
The BSTDB is an international financial institution established by Albania, Armenia, Azerbaijan, Bulgaria, Georgia, Greece, Moldova, Romania, Russia, Turkey, and Ukraine. The bank headquartered in Thessaloniki, Greece, 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.