European development banks warn that the corona virus crisis (COVID-19) will cause a “massive” economic blow. This year to its investment zone which has been depressed due to falling commodity prices.
The European Bank for Reconstruction and Development (EBRD) predicts that nearly 40 of the economies of the countries in which it operates will shrink an average of 3.5% this year due to the COVID-19 outbreak. But the economies of these countries are expected to rebound 4.8% next year.
The institute also warns that the decline may become deeper if the social distancing rules last longer than anticipated.
“The crisis has been a big blow and coming out of it will be just as challenging. ” EBRD Chief Economist Beata Javorcik said in the bank’s latest prospect report, as reported by AFP on Wednesday (05/13/2020).
“This is not the time to get involved in economic nationalism and protectionism. But time to shape a better future through international commitments to free trade. Climate change mitigation, and economic cooperation,” he added.
Furthermore, the EBRD warned that the growth forecast would depend entirely on the conditions caused by the global health crisis and commodity prices, especially oil.
The agency also warned there might be “significant long-term economic, political and social impacts” that could deepen the pressure on growth.
“If social distance stays longer than anticipated, the recession may be much deeper. Where the level of output per capita in 2019 will not be reached again for the next few years,” the EBRD said.
The latest estimate of the EBRD assumes countries are gradually coming out of global lockdowns and travel restrictions. Followed by returning to normal life in the second half of this year.