ArmInfo.One of the most significant consequences of the coronavirus pandemic may be an increase in centrifugal forces simultaneously with a new round of weakening globalization in the world. This is stated in the report published today "Eurasian Economic Integration - 2020", prepared by the Center for Integration Studies of the Eurasian Development Bank (EDB).
"Summing up the results of the integration processes in 2019, one cannot abstract from the realities of the H1 of this year - from the global crisis that erupted in connection with the COVID-19 pandemic. In early 2020, the world economy and the EDB member states faced unprecedented economic, financial and social challenges in connection with the coronavirus pandemic. The spread of COVID-19 has led to a disruption in global supply chains, increased volatility in financial and commodity markets, and has negatively impacted many key sectors of the economy", the authors of the study believe.
As a result, in the Q2, the world economy is entering a phase of recession, which may become the deepest in recent history.
According to the results of the first four months, all countries of the Bank, except Tajikistan, registered an economic recession: Russia's GDP contracted by 1.9 y-o-y, Kazakhstan - by 0.2% y-o-y, Belarus - by 1.3% y-o-o , Kyrgyz Republic - by 3.8% y-o-y, in Armenia the indicator of economic activity fell by 1.7% y-o-y.
In May 2020, the process of phasing out of quarantine began in many countries around the world, including the EDB's region of operations.
The states, taking into account the epidemiological situation, are implementing measures to restore the economic sector. Leading indicators indicate that the decline in business activity may slow down in May. Purchasing Managers' Index (PMI) for Kazakhstan and Russia rose from their record lows in April. By the end of May, in most of the Bank's member countries, population activity increased compared to the minimum in April, but still remained below the pre-quarantine level. Thus, the region's economy began to move towards recovery.
"The EDB member states are likely to get out of this situation unevenly, including due to the different possibilities of fiscal incentives and differences in the epidemiological situation," the report says.
The Bank believes that the pandemic has exposed the weaknesses of the globalized production system. At the moment, the world community is faced with the task of rethinking the supply architecture, and in the medium term, we should expect an intensification of the process of regionalization of production chains.
Regionalization can be an effective way to mitigate global shocks. This process implies strengthening cooperation between neighboring countries, united on a regional basis, in order to create (in the case of the EAEU - restoration) effective and flexible supply chains and reduce the risks of overdependence on trade with the largest industrialized states and emerging market countries. With regard to basic medical and food products, regionalization should help to achieve a safe level of localization of production and increase the resilience of the countries of association to emergencies such as the COVID 19 pandemic.
