Eastern Europe & the CIS
all you need to know
In 2020, the economy of Russia shrank by 3.1%, Ukraine’s by 4.2%, Bulgaria’s by 3.8%, Estonia’s by 2.9%, Latvia’s by 3.6%, Lithuania’s by 0.8%, and Romania’s by 3.9%. Although specific conditions varied, all of the states in Eastern Europe and the Commonwealth of Independent States were hit hard by the pandemic.
In Russia, the economy suffered from the fall in demand for oil and gas. Rosneft, for instance, one of Russia’s leading oil and gas extractors, saw a 10% decline in output in the first quarter of 2020 alone. Russia’s crude exports for 2020 were down 11% from the previous year. This was offset somewhat, however, by an increase in non-energy exports, particularly in agricultural products, of 20% on the year before.
In Ukraine, the contraction of 2020 ended four years of growth. The economy suffered not just from the impact of the pandemic, but also from the ongoing drain imposed by the seven-year war and Russian occupation of the country’s eastern provinces. According to one study, Ukraine’s per capita GDP shrank by 15% over the course of the first four years of the war.
The economies of the EU and eurozone countries such as the Baltic states and Romania are tightly bound to the fate of the other single-market countries. According to a report by Estonia’s parliament, the Baltic economies were cushioned from the worst impacts of the COVID-19 pandemic by their close links to the Nordic economies. The latter performed relatively well during the pandemic, enabling trade with their neighbours to continue with as little interruption as possible.
Bulgaria’s economy was impacted significantly by the reintroduction of lockdown at the end of 2020, as a second wave of the virus swept over the country. The pandemic was particularly damaging to one of the country’s main sources of income: tourism. The World Bank has highlighted the importance of not withdrawing government economic support too quickly, even once the crisis phase of the pandemic has passed.
Another good economic performer was Romania. After a decade of solid growth, the government reacted quickly to the crisis, imposing lockdown and pumping a stimulus worth over 4% of GDP into the economy. Sectors such as tourism and hospitality were severely affected by the pandemic. But the overall economy is expected to bounce back at a rate of 7% in 2021.
Nor is Romania alone in this. All the countries covered by this report are expected to return to robust growth in 2021. Russian GDP, for instance, is forecast to grow by 3.8%, and Ukraine’s by 4%.
Quick facts about the region
Eastern Europe and the CIS are a highly diverse group of countries with different challenges and consumer preferences from one market to the next. A strategy that works in Estonia, for instance, may not be right for Ukraine or Russia. In general, however, these markets are well connected, with their citizens increasingly used to shopping online. And lockdown has, as everywhere, brought new demographics online for the first time.