Coronavirus-affected economies across Europe could contract on average by 3.5% this year with a rebound of 4.8% possible in 2021, according to a European Bank for Reconstruction and Development report.
EBRD warns that projections are subject to “unprecedented uncertainty”.
“EU members in south-eastern Europe were also likely to be severely affected by the coronavirus crisis, with a major channel for disruption coming from tourism, especially in Cyprus, Greece and Bulgaria,” said the report.
More specifically EBRD reported that Cyprus “in the baseline scenario, we expect GDP to fall by 6% in 2020, with a rebound of 5% in 2021”, as “in March, the government announced a financial support package of €700 mln.”
According to the EBRD, “in 2019, GDP growth in Cyprus decelerated moderately but remained robust at 3.2%.”
“Investment, particularly in the construction sector, was one of the main drivers of growth.”
“Private consumption also remained resilient throughout the year given the strong economic sentiment and improving market conditions.
Unemployment stood at 6% in January 2020, seven percentage points below the 2014 peak. Despite the robust recovery observed over several years, Cyprus is going to be heavily hit by the consequences of the coronavirus pandemic.”
Cyprus lockdown measures have seen its borders closed putting a halt to tourist arrivals.
“Given the country’s exposure to travel and tourism (around 14% of GDP) and the traditional role of investment and financial services in supporting growth, the impact of the coronavirus crisis is expected to last for some time,” said EBRD.
It said the extent of the recession in 2020 is highly dependent on the duration of restrictions on the movement of people in the UK and Russia, which together account for about half of annual tourist arrivals.
“It will also be dependent on the capacity of the government to implement financial support measures.”.
The report said Greece will also suffer a fall in GDP of 6% this year because of the economic impact of the coronavirus pandemic.
The Bank expects the country to recover rapidly in 2021 with similar GDP growth of 6%.
It said growth in Turkey is likely to be heavily impacted by the coronavirus pandemic in 2020.
“We expect GDP to contract by 3.5% in 2020, followed by a robust recovery to 6% growth in 2021.”
“There are significant risks surrounding this forecast, which is heavily dependent on the duration and extent of the social distancing measures.”