The Eurasian Development Bank says unemployment rates in most of the Bank’s member nations remained moderate last year and showed signs of decline in late 2020 – early 2021. Government anti-crisis measures have helped a lot in stabilizing the labor market.
Potential economic growth rates in most of the region’s countries reportedly fell by 0.5–1 p.p. compared to pre-pandemic levels. This was due to the pandemic’s negative impact on investment, innovation, and labor resources. In the medium term, government development programs can be a key factor in restoring GDP growth rates in the region, according to the EDB.
Services reportedly suffered significant losses from the pandemic but retain the potential for active recovery when restrictions are eased.
Lower consumer demand and social distancing measures have caused a deep decline in retail, hospitality, as well as professional, cultural, and entertainment services.
Mineral extraction has shrunk due to lower global demand, falling hydrocarbon prices, and the OPEC+ agreement to reduce oil production. A gradual increase in demand and improvements in the market environment will help the extractive industries to recover in the medium term.
The manufacturing industries have adapted to pandemic challenges in most EDB member countries. The production of food, chemicals, pharmaceuticals, machinery, and electrical equipment has shown a strong dynamic. Manufacturing has reportedly been much less affected by the pandemic compared to services, partly because of softer restrictions on businesses.
The deep recession in the transport sector was caused by supply chain disruptions and restrictions on cross-border movements.
Global food prices have grown significantly during the pandemic. In February 2021, the FAO index reached its highest monthly average since July 2014. The increases in food prices should be expected to slow down in the second half of 2021 provided that the pandemic subsides and restrictions are eased.
Inflation in EDB member countries accelerated temporarily in late 2020 – early 2021 above the target rates. This was mainly due to the significant global rise in food prices and the depreciation of the national currencies. Because of these factors, inflation in the Bank’s region of operations remained high at the start of 2021. Supply chain disruptions due to the pandemic and the cost of anti-epidemic interventions have exerted additional pressure on prices. When the pandemic subsides, the pro-inflationary effects from global food prices and supply chain disruptions will lessen, leading to a slowdown in inflation in the second half of the year.
The cycles of interest rate cuts in EDB member countries that supported the economies throughout 2020 have ended because of rising inflation risks.
The Eurasian Development Bank (EDB) is an international financial institution founded by Russia and Kazakhstan in January 2006 with the mission to facilitate the development of market economies, sustainable economic growth, and the expansion of mutual trade and other economic ties in its member states. The EDB's charter capital totals US$7 billion.
The member states of the Bank are the Republic of Armenia, the Republic of Belarus, the Republic of Kazakhstan, the Kyrgyz Republic, the Russian Federation, and the Republic of Tajikistan.
