Macroeconomic Forecasts for 2021

The countries in the Bank’s region of operations have been hit by widescale social and economic shocks this year due to the COVID-19 pandemic. The Bank forecasts its member states’ aggregated GDP to contract by 3.8% in 2020 after a 1.7% increase in the previous year. The economy of Armenia will experience a 6.4% decline; the Belarus economy 1.5%; the Kazakhstan economy 3.0%; the Kyrgyzstan economy 7.5%; and the Russian economy 4%. In Tajikistan, economic growth will slow to 4.5%, down from 7.5% in 2019.

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The countries in the Bank’s region of operations have been hit by widescale social and economic shocks this year due to the COVID-19 pandemic. The Bank forecasts its member states’ aggregated GDP to contract by 3.8% in 2020 after a 1.7% increase in the previous year. The economy of Armenia will experience a 6.4% decline; the Belarus economy 1.5%; the Kazakhstan economy 3.0%; the Kyrgyzstan economy 7.5%; and the Russian economy 4%. In Tajikistan, economic growth will slow to 4.5%, down from 7.5% in 2019.

EDB analysts believe that the pace at which the Bank’s member economies will recover from this year’s turmoil will largely depend on the future developments around the pandemic. The EDB baseline scenario is based on the assumption that the COVID-19 pandemic will slow down, with restrictive measures being eased both globally and in the countries of the EDB operating region in the first half of 2021. External demand will gradually expand for the EDB member countries in 2021. The average price of Urals crude oil is expected to reach USD 49 per barrel after a price of USD 41 in 2020.

The review notes that the easing of the lockdown will boost the recovery of consumer and investment activity in the countries of the EDB operating region in 2021. Stronger external demand and higher commodity prices will support exports. Most of the Bank’s member countries are expected to maintain a soft monetary policy in the coming year. This will be also conducive to economic recovery.

EDB analysts point to a number of factors that will constrain economic recovery in the region. The Bank’s baseline scenario suggests that sanitary restrictions will be eased gradually, and social distancing will remain part of daily life at least for the next year. Investment growth will be weak amid high uncertainty. Government support for the population and businesses through fiscal policies will be reduced.

The EDB projects growth in the economy of Armenia at 4.9% in 2021; that of Kazakhstan at 4.4%; that of Kyrgyzstan at 3.7%; that of Russia at 3.2%; and that of Tajikistan at 6.1%. Only Kazakhstan will experience a full GDP recovery in 2021 to the pre-crisis level of 4Q2019, as its decline in 2020 is estimated as relatively small. Armenia, Kyrgyzstan and Russia will reach their pre-crisis production level in the first half of 2022. The slow recovery is largely due to the high losses this year. In Belarus, GDP is expected to decrease by 0.1% in 2021 and its volume to reach the level of 4Q2019 only in the first half of 2023. Limited fiscal reserves, low investment demand and the unstable finances of the real sector will slow down the speed of recovery of the Belarusian economy. Risks to the EDB baseline scenario remain heightened and skewed towards the downside.