Opening Asia for Russia

Partial reorientation to the production of masks and protective suits smoothed out the fall in a number of industries

18.06.2020 181 просмотров

The economy of the region has begun to move towards recovery, the press center of the Eurasian Development Bank reports.

The beginning of the second quarter of this year was characterized by a significant decline in business activity in the EDB member countries, according to a recent information and analytical review of the Eurasian Development Bank. In most of them, strict social isolation measures were in place to limit the spread of coronavirus infection. The work of many business entities, mainly providing consumer services, was suspended. As a result, according to the results of four months of 2020, all states of the EDB region of operations (except Tajikistan) registered an economic downturn: Russia’s GDP decreased by 1.9% y/y, Kazakhstan – by 0.2% y/y, Belarus – by 1 .3% y/y, in the Kyrgyz Republic - by 3.8% y/y, in Armenia the indicator of economic activity fell by 1.7% y/y. A significant deterioration was noted in the wholesale and retail trade, the tourism industry and the restaurant business, sectors providing other paid services to the population. Domestic consumer demand was negatively impacted by social isolation measures, the suspension of the work of individual organizations and the "cooling" of credit activity. Additional negative factors were pandemic-induced changes in labor markets associated with an increase in part-time employment and a decrease in incomes of the population, as well as a decrease in remittances (in Armenia, the Kyrgyz Republic and Tajikistan).

Reduced household demand led to a deterioration indicators of enterprises producing non-food products. Large losses were noted in the sectors of light industry (production of textiles and clothing, footwear, leather and products from it).

Partial reorientation to the production of masks and protective suits smoothed out the fall in the designated sectors. A significant decline in production in April was observed in industrial sectors oriented towards investment demand (engineering, production of electronic and electrical devices, etc.), which declined in all countries of the region. Its dynamics was negatively affected by the growing uncertainty of economic development prospects, the deterioration of business sentiment, as well as the disruption of value chains.

The weakening of domestic and external demand, social isolation measures and limited communication between states worsened the performance of the transport sector. The COVID-19 pandemic affected the enterprises of the EDB member countries that produce food and pharmaceutical products, the construction industry, as well as industries characterized by a continuous cycle (mining, petrochemical industry) least of all.

In order to support of economic entities affected by the consequences of the spread of coronavirus, the authorities of the states of the region are easing fiscal policy, including by using fiscal buffers and increasing borrowing volumes. The actions of monetary regulators are aimed at ensuring favorable financial conditions by reducing interest rates, supporting bank liquidity and the ability of depository institutions to lend to economic agents.

In May 2020, the process of phased out of quarantine. States, with an eye to the epidemiological situation, are implementing measures to restore the economic sphere. Leading indicators indicate that the fall in business activity may slow down by the end of May. The PMI indices of Kazakhstan and Russia rose from record lows in April. By the end of the month, in most of the Bank's member countries, the activity of the population in public places increased compared to the minimum indicators of April, but still remains below the pre-quarantine level.

Thus, the region's economy began to move towards recovery. EDB member states are likely to come out of this situation unevenly, including due to different fiscal stimulus opportunities and differences in the epidemiological situation.

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