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The countries of the Eastern Europe and Caucasus are likely to be severely impacted by the coronavirus crisis, the European Bank for Reconstruction and Development (EBRD) said in its latest Regional Economic Prospects report. Most countries of the region will be affected by tightening global financial markets, strong pressure on domestic foreign exchange markets and reduced foreign demand for exports.

The report notes that domestic demand has been reduced due to public health measures put in place to contain the spread of the virus. Lower commodity prices are putting additional strain on the exporters of hydrocarbons and metals – Azerbaijan, Ukraine and Armenia – while an expected drop in remittances will likely further suppress household disposable income in most countries in this region, especially in Moldova, Armenia, Ukraine and Georgia. Loss of tourism receipts will be a significant blow to the Georgian economy.

According to the section devoted to Armenia, the global uncertainty and decreasing demand resulting from the coronavirus crisis, combined with volatility in commodity prices, will affect the economy directly via a decrease in exports, which are dominated by copper and other mining products, and indirectly through economic links with Russia, including a likely downturn in remittances. Prolonged measures of social containment and low mobility would hurt Armenia’s tourism sector, which is largely dependent on visits from Armenians abroad. We project the Armenian economy to shrink by 3.5 per cent in 2020, with a rebound of 5.5 per cent in 2021.

It reminds that economic growth in Armenia accelerated to 7.6 per cent in 2019, driven by the significant increase in the consumption of households and supported by stronger export growth. The increase in consumption was led by household credit, up by 30 per cent in 2019, and by a 10 per cent increase in money transfers from abroad.