April 24 (SeeNews) - Exports across Southeast Europe (SEE) will fall due to depressed demand and disruptions in value chains resulting from the coronavirus outbreak, as Romania and Serbia would likely bear the greatest cost, the Organisation for Economic Co-operation and Development (OECD) said on Friday.
The two countries' manufacturing sectors are more highly integrated into global supply chains and contribute the most to their economies in terms of value-added and employment, OECD said in a report on the coronavirus effect on SEE economies by April 15.
The coronavirus pandemic has led to a notable slowdown in SEE economies, which may slide into recession, as they rely heavily on trade with and investments from the EU countries worst hit by the crisis, such as Germany and Italy, the organisation commented.
Within the domestic markets small and medium-sized enterprises (SMEs), manufacturing and tourism sectors will be among the most affected, it noted.
OECD also said that the crisis will certainly lead to a collapse in tourism ahead of the summer season, especially in Albania and Montenegro where tourism revenues exceed 20% of GDP in both economies.
A deceleration of both public and private investment can also be expected, which will further inhibit economic growth, along with a decrease in remittances, due to travel restrictions and increased unemployment, the organisation said, noting that in Kosovo for instance, remittances account for 15% of overall GDP.
The economic slowdown will also come at a bad time for Albania and Croatia, as both economies have been recently hit by earthquakes that have taken a toll on physical infrastructure and economic activity, OECD pointed out.
All of the currencies in the Western Balkans have depreciated since the outset of the COVID-19 crisis, with the Albanian lek being the worst hit, the OECD also said. "The depreciation of local currencies directly affects enterprises’ ability to make payments denominated in foreign currency, which is especially problematic for the Western Balkans as foreign exchange denominated loans represent 58% of all loans (excluding Kosovo and Montenegro)," it added.
The region’s stock markets were not spared from the effects of the crisis, however, the shock’s impact remains more contained in the Western Balkans compared to the EU, according to OECD. The risk perception for bonds seems to be highest for Croatia and Romania, as their bond spreads have increased by around 65% since the beginning of 2020.
"Trade with the EU more significant than intra-regional trade both in volume and value added. Thus, in light of the COVID-19 crisis, the main challenge of the Western Balkan economies is to keep all partners linked and to ensure continuous connections with the EU members to guarantee essential trade flows," the OECD said.
The OECD recommends that Western Balkans governments further develop regional co-ordination mechanisms to monitor the crisis’ impact on trade, focus their regulatory efforts on preserving the flow of goods and services in the region and with EU emeber states and work on overcoming tariff restrictions.
More than 16,000 people in SEE had tested positive for COVID-19 by April 15.