SARAJEVO (Reuters) - Economies in the Western Balkans region will contract by up to 5.6% under the best scenario of how the coronavirus pandemic unfolds in Europe, the World Bank said on Wednesday.
According to that “baseline scenario”, containment measures could be lifted by the end of June and a gradual recovery could start in the second half of 2020.
The “downside scenario” assumes the outbreak lingers and containment measures can only be lifted at end of August, with a recovery of economic activity only possible in the final quarter of 2020.
“The magnitude of the recession depends on the duration of the pandemic in Europe,” Linda Van Gelder, World Bank country director for the Western Balkans, said in a statement on its latest Regular Economic Report.
In all the Western Balkan countries - Albania, Kosovo and Montenegro, Bosnia, North Macedonia and Serbia - the recession will be driven by a plunge in both domestic and foreign demand during the COVID-19 crisis, the bank said.
All the countries have introduced lockdowns, which are expected to affect businesses and services in the export and tourism-oriented economies. Remittances and investment are also expected to decline significantly.
Even under the baseline scenario, Albania and Kosovo, whose economic structure depends on service exports and tourism, will be hit hard and their economies are projected to contract by about 5%, the report said. Montenegro’s economy is seen as shrinking by 5.6%.
Export-oriented and dependent on EU markets, Bosnia, North Macedonia and Serbia are expected to experience only slightly less acute recessions. Their economies are set to suffer from supply-side disruptions and seen contracting by 3.2%, 1.4% and 2.5% respectively.
In the downside scenario, the economy would contract in the region by an average about 5.7% in 2020, causing a more severe recession than the global financial crisis, the bank said. It did not give an average under the baseline scenario.
Looking at specific countries under the downside scenario, Kosovo’s economy would shrink 11.3%, Montenegro’s by 8.9% and Albania’s by 6.9%.
Van Gelder said growth was expected to rebound strongly in the region over the medium turn, as economic activity gradually returns to normal, “but this also depends on the length and intensity of the current crisis, as well as what steps policymakers take to address this pandemic”.
Reporting by Daria Sito-Sucic; Editing by Alison Williams