COVID-19 Impact: Central Europe struggles with emerging economic fallout

European Union economy

At a time when the European Union economy is facing the worst recession since World War II, triggered by the Coronavirus pandemic lockdown, economists are warning that Central European economies are going to face major economic repercussions as compared to other countries in the bloc. The pandemic has had an unprecedented impact on manufacturing, energy sector, and tourism industry, with Central and Eastern European (CEE) economies facing their worst year since the 2008 global financial crisis.

With concerns over a region-wide economic recession, the downturn is visibly higher in Slovakia, Hungary, and Romania, according to French bank BNP Paribas. Furthermore, exports are also predicted to go down in countries across the region which are heavily depended on exports, particularly in the auto sector. As per reports, more than 95% of Slovakia’s GDP comes from exports, while it is 80% for Hungary from exports of goods and services, essentially to western Europe.

While the COVID-19 pandemic may have helped Central European countries better position themselves in the EU, there’s a heavy dependency on the steps taken by Western Europe, particularly Eurozone, to tackle the economic ramifications due to the virus outbreak.

Significantly, in Q1, Central Europe recorded a comparatively better growth performance in the EU bloc, as countries like Bulgaria, Hungary and Romania showed positive economic growth during the period. In view of the repercussions led by the pandemic crisis, Central Europe’s GDP is now expected to decrease by -3.8% in 2020, according to a report by French Banking group BNP Paribas.

Many of the European countries, including Germany, have begun reopening their borders for each other after almost three months of closure. However, uncertainty still looms on the speedy recovery of the tourism sector, which is a major contributor to the EU GDP. As the economic fallout mushrooms, fear of second wave of pandemic outbreak still persists upon the European governments. 

Taking cognizance of the crisis, Prime Ministers of four Central European countries, also called Visegrád Four (V4) which included Slovakia, Poland, the Czech Republic, and Hungary, met during the EU’s political meeting recently and called for the bloc to ensure “fair” distribution of controversial economic recovery fund across the bloc.

As predicted by the European Commission, the EU economy will contract by 7.5% this year. Meanwhile, on June 19, the European Council will be convening a video conference to decide on the 750-billion euro ($850-billion) worth stimulus fund.

With a substantial decline in the number of infected cases, European countries have begun easing their pandemic restrictions to kickstart economic activities. However, World Health Organisation officials have warned of a second wave in autumn this year.

Leave a Reply

Your email address will not be published. Required fields are marked *