(by Stefano Giantin) (ANSA) - BELGRADE, MAY 7 - The economic downturn caused by the pandemics, by restrictive measures and lockdowns will be massive in the whole Central- and Eastern Europe, and recovery weaker than in 2010, with countries that rely on external trade and tourism, such as Croatia, Slovenia, Slovakia and Montenegro that will be particularly hit, new forecasts of the Vienna Institute for International Economic Studies (wiiw) show.

According to a new wiiw report released on Wednesday, the biggest real GDP contractions this year are expected in Croatia (-11%), Slovenia (-9.5%), Slovakia (-9%) and Montenegro (-8%), where the recession will be stronger than the average in the region. In Eastern Europe, the average GDP will decline by around 6.1% in 2020, compared with 5.6% in 2009, making 2020 "the worst year for Eastern Europe since the early 1990s." Countries less relying on external trade and tourism, those that used significant financial resources to mitigate the crisis and nations that were able to lift the lockdown earlier will be relatively less impacted by the looming recession, wiiw said.

Among them, the Czech Republic (-4.8%), Kosovo (-4.4%), Poland and Serbia (-4%), and Moldova (-3%), wiiw noted.

The contraction of the economies in the region could be, however, more pronounced than the actual forecasts show. The impact could be more negative in particular in the Western Balkans, and in countries relying on large-scale capital inflows, remittances, and foreign direct investment. "This is a crisis without precedent, and the institute's forecasts are subject to an unusually high degree of uncertainty," wiiw remarked. "A much more negative scenario than the currently projected is quite possible," the institute added, anticipating that "chances for a more favorable outcome, on the other hand, are quite slim." At the same time, the crisis will change many aspects of the economic life in Central- and Eastern Europe and in the Balkans.

"Consumers are likely to be more careful and allocate a greater share of their income to saving than before," while governments may introduce higher taxes "to offset the huge increase in public debt". At the same time, the Visegrad countries (Poland, Hungary, Czechia, Slovakia) and perhaps Serbia and North Macedonia may benefit to a new wave of delocalizations of Western European manufacturing and service companies, while Slovenia, Czechia and the Baltic countries could enjoy a boost on the digital economy front.

On a geopolitical level, "China is likely to continue to play an important economic and political role in the non-EU countries" in the region, while Russia "does not have the fiscal resources to be a major economic player." The recovery in the region is expected to start in 2021, but it will be weaker than after the "Great recession", wiiw forecasted. According to the Vienna-based institute, the average growth in the region will be 2.8% in 2021, while in 2010 the GDP growth reached 4.4%. A weaker recovery is expected as "this crisis hits not only one sector, but almost all sectors at the same time" and "this means a stronger drop in 2020 than in 2009," the executive director of wiiw, Mario Holzner, told ANSA.

Moreover, "the recovery can only fully begin when there is a vaccine that might only come in the second half of 2021. After that the recovery might be actually better than after the global financial crisis," Holzner noted. (ANSA).