CEE and coronavirus: Strong fundamentals outweigh trade risks
Emerging Europe’s economies are vulnerable to trade disruption from Covid-19, but strong macro fundamentals and robust banks will limit the impact.
Events in the Czech Republic and CEE are being closed to the public, due to the outbreak
Coronavirus has been slow to arrive in emerging Europe. With recorded cases starting to rise in countries such as the Czech Republic, Poland and Romania, however, market participants are taking stock of the possible impact of the disease on the region’s economies and banking sectors.
For the moment, the consensus is that the main risks stem from the very high integration of the region’s open economies into European and global trade flows and supply chains.
This is particularly true for the manufacturing hubs of Central Europe. In Hungary, the Czech Republic and Slovakia, total exports account for more than 80% of GDP, according to economist Liam Peach at Capital Economics.
“Poland is less export-orientated, but it is still a highly open economy, and exports of final consumer goods account for a larger share of exports,” he adds. “As a result, the economy would be affected by weaker consumer demand from virus-hit economies, particularly in the eurozone.”