Planet earth is shutting down. In the struggle to get a grip on coronavirus, CESEE countries are hit the most. One country after another is demanding that its citizens shun society. As that sends economies reeling, desperate governments are trying to tide over companies and consumers by handing out trillions of dollars in aid and loan guarantees.

A lot of countries and firms will run into financing difficulties. The difference between difficulties and outright collapse depends heavily on central banks, IMF and other international lenders. The role of wealthy governments and big central banks is central. They have the resources to tackle this. H1 recession could be among the deepest of all time. Full recovery H2 2021 and into 2022. However, when the recovery comes, it should be strong.

Source: Chinese authorities

A lot of countries and firms will run into financing difficulties. The difference between difficulties and outright collapse depends heavily on central banks, IMF and other international lenders. Therefore, the role of wealthy governments and big central banks is central. Besides, they have the resources to tackle this. H1 recession could be among the deepest of all time. Full recovery H2 2021 and into 2022. However, when the recovery comes, it should be strong.

Forecasts for Central, East and Southeast Europe (CESEE)

Source: Annual Database incorporating national and Eurostat statistics.

Italy has an export-oriented economy and is the 9th largest exporter and 11th largest importer worldwide, with trade making up nearly 59.5% of its GDP (World Bank, 2019). According to data by ISTAT, out of a total of 195.745 exporting companies in Italy, around 45% are active in the manufacturing industry, which has traditionally been the key sector for Italian exports (especially for machinery, fashion and luxury goods, furniture). The country’s main exports include medicaments, cars and vehicle parts, refined petroleum, trunks, suit-cases, vanity-cases, and footwear. Italy is also the second-largest wine exporter in the world.

The country is dependent on imports for its energy needs, hence petroleum and gas products are among the main items in Italy’s import bills, together with cars and medicaments. Therefore, when we are talking about CESEE countries, the main partners are Albania and Slovenia with nearly 20% of external trade. The main countries of origin for Italian imports are Albania, Slovenia, and BiH.

Source: wiiw forecast

If China is a guide, it could be easily looking at contractions of 3-4% in 2020 for a lot of CESEE. That being said, for some could be much lower, and possibly even worse than 2009. Quality of health systems and fiscal space will be key (Ukraine example). Full bounce back unlikely to come until H2 2021. This table is a highly optimistic ‘best case’ scenario.

Besides, the spread of the coronavirus to Europe is already impacting production networks, tourism, aviation, and energy. The extent of the fallout is still highly uncertain but all face recessions. The capacity to cope depends heavily on the quality of the healthcare system and fiscal space, big differences within CESEE. Ukraine, Turkey, parts of Western Balkan will be most affected, much of EU-CEE should fare better.