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EBRD cuts 2020 GDP forecasts for Georgia, Armenia and Azerbaijan

TBILISI, Oct 1 (Reuters) - The European Bank for Reconstruction and Development has cut its 2020 economic growth forecasts for Armenia, Azerbaijan and Georgia as they are hit by the coronavirus crisis, but expects a recovery in the South Caucasus countries next year.

“The Covid-19 crisis weighed on growth in eastern Europe and the Caucasus as remittances fell sharply during the early months of the pandemic, tourism collapsed, weighing on growth in Georgia and commodity prices remained relatively low, affecting Azerbaijan, Ukraine and Armenia,” the bank said in a regional economic prospects report.

“GDP in the region as a whole is expected to fall by 4.5% in 2020, recovering somewhat to 2.5% in 2021.”

Georgia’s gross domestic product is expected to shrink by 5.0% in 2020, before rebounding to around 3.5% in 2021, the EBRD said. In May, the EBRD had forecast a 5.5% contraction in 2020 and 5.5% growth in 2021.

For Armenia, the EBRD forecast that the economy would shrink 5.0% in 2020 because of the coronavirus crisis and volatility in commodity prices, then expand by 4.0% in 2021. It had previously forecast Armenia’s 2020 contraction would be 3.5% this year and 5.5% in 2021.

GDP in oil-rich Azerbaijan is expected to contract by 3% in 2020, unchanged from the Bank’s previous forecast, but should rebound by 2.5% next year, instead of 3%.

The EBRD drafted forecasts before a flare-up of the conflict between Azerbaijan and Armenian forces over Azerbaijan’s breakaway Nagorno-Karabakh region.

Dozens have been reported killed and hundreds wounded in fighting since Sunday that has spread well beyond the enclave’s boundaries, threatening to escalate into all-out war between the former Soviet republics of Azerbaijan and Armenia. (Reporting by Margarita Antidze; editing by Larry King)