Economic Monitor Issue 12 | June 2020


  • We forecast GDP to decline by 6.3% in 2020 due to Corona crisis fall-out – deeper recession than after global financial crisis
  • Consumption, investments and exports all expected to decline; lower imports and higher government spending mitigate the negative effect on GDP
  • Economy to recover strongly by 5.5% in 2021
  • Inflation to decline to 1.3% in 2020 (after 4.8% in 2019) as economy runs below capacity
  • As such, monetary policy rate expected to decline further and to remain low for the foreseeable future
  • Exchange rate holding up so far amidst support by National Bank, but moderate depreciation possible in 2020 as economy opens up again
  • Increasing public expenditures and falling revenues results in a budget deficit of 5.4% this year – assuming the government can access external assistance


  • Corona:Cases rise unabated despite early and strict government response
  • Government support muted due to lack of funding
  • External assistance to date amounts to 2.5% of GDP; potential for further assistance worth 1.5% of GDP if conditionality is met
  • Banking sector: well equipped to cope with corona effects thanks to successful reforms
Download Economic Monitor 12/2020