South Eastern Europe Economic Forecast

Economic Snapshot for South-Eastern Europe

April 8, 2020

The economic outlook for the region has darkened dramatically due to the Covid-19 pandemic, which will hammer tourism, trade and private consumption. Contractions in Turkey, Romania, Greece, Bulgaria, Croatia and Serbia are expected to plunge the regional economy into recession this year. Fiscal space to respond to developments varies greatly across the region.

 
South-Eastern Europe Monetary & Financial Sector News

Regional inflation edged down to 7.2% in February from 7.3% in January on softer price pressures in all countries except Cyprus, North Macedonia and Turkey. This year, inflation is expected to ease notably as the health crisis weighs heavily on economic activity in the region, while low global oil prices provide further downward pressure.

Interest rates were cut in recent weeks in Turkey, Romania, Serbia, Albania and North Macedonia to combat the economic fallout of the Covid-19 pandemic. The ECB, meanwhile, opened the liquidity floodgates but kept interest rates unchanged. The regional interest rate should be lower this year compared to last as central banks look to buttress activity.

The Turkish lira lost notable ground against the USD in recent weeks amid a flight to safe assets due to the Covid-19 pandemic. Against the EUR, the Serbian dinar was relatively stable while the Romanian leu and Albanian lek depreciated. The EUR itself depreciated somewhat against the USD. This year, the regional exchange rate is seen weighed on by lira weakness.

 

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