Macroeconomic consequences of the Corona crisis – Joint meeting of OAOEV Working Groups Ukraine, Belarus and South Caucasus

On the occasion of the joint video conference of OAOEV Working Groups Ukraine, Belarus and South Caucasus on March 26, 2020, Ricardo Giucci presented an overview of the macroeconomic consequences of the corona crisis for the region.

A massive decline in GDP and devaluations of the local currencies are expected, which will also have a negative impact on German exports, said Giucci. External financial support, e.g. from the IMF is required. He warned that the countries do not have the administrative and institutional prerequisites for possible instruments such as loans and grants to companies.

Ukraine, Belarus, Georgia and Armenia would be hit by several external shocks, particularly the slump in export demand, the decline in remittances from guest workers, border closures and the devaluation of national currencies.

Ukraine: The hryvnia lost 13% in March, it will be threatened with a twin deficit in the budget and in the current account, and a fall in GDP of at least 4%, Giucci said. The country urgently needs an IMF program.

Belarus: The situation of Belarus seems even more difficult due to the current dispute with Russia on oil deliveries, the falling oil price and the poor relations with international financial institutions.

Armenia and Georgia: Giucci sees a somewhat more favorable situation for Georgia and Armenia, since both countries have good relations with the IMF. Critical here are the decline in tourism and the falling remittances from abroad, which account for around 12% of the economic output. Giucci reported that the government in Georgia responded with sectoral measures, including a tax relief. In addition, the banks are taking own measures and defer interest and principal payments.

The concluding discussion revealed that the crisis confronts the governments, companies and societies in the region with diverse, interrelated problems for which most of the countries are not prepared for.

Find more information on OAOEV conference