COVID-19 Pandemic in Central, Eastern and South-Eastern Europe: Deepest Recession Since the Transformation Crisis

Among the countries of Central, Eastern and South-Eastern Europe, real GDP will in 2020 shrink most in Slovakia, Slovenia, Croatia and Montenegro. This reflects either a high degree of vulnerability to disruptions in world trade or a particular dependence on tourism. While some CESEE countries can significantly ease their fiscal policy to mitigate the downturn, the possibilities for external financing are very limited in most countries in the region. As growth slumps and budget deficits widen, the ratio of public debt to GDP will rise sharply. Due to their dependence on large capital inflows, the interruption of these inflows will place a particular burden on Ukraine, Moldova and many countries in the Western Balkans.