Covid-19 influence on the baltic-black sea region: cases of eu's members and Ukraine

The economic consequences of the pandemic for all the countries in the Baltic Sea region led to the so-called coronavirus recession, which became a reality after the stock market crash in March 2020. The economies of the three Baltic States have also been significantly affected by the pandemic. Small in volume and open in nature, with a relatively large transport sector, they were vulnerable to a sharp drop in external demand.

The closure of borders and restrictions on freedom of movement led to significant economic consequences. The tourism and transport industries were among the first to be hit by the pandemic. For example, regional air carriers, primarily the Latvian AirBaltic, were forced to completely stop all flights from March 17 to mid-April 2020, and then significantly reduced the number of flights arom April to May, 580 flights were cancelled (AirBaltic, 2020; Kaminski-Morrow, 2020). As a result, the company was forced to reduce the number of employees by at least 250 people.

Domestic containment measures have affected household consumption as well as industrial production and the rapidly growing tourism industry sector. The economies of the Baltic States fell by 8 % by the end of 2020 despite a fairly rapid easing of restrictive measures, as well as the introduction of fiscal stimuli, support of economic activity, which meant to reduce the decline in GDP comparing to other EU member states (Baltic Sovereigns, 2020).

In Bulgaria prior to the pandemic a series of structural reforms, the extremely successful integration of Bulgarian manufacturing firms into global production chains, and sound macroeconomic governance led to a five-year GDP growth rate above 3 % (World Bank, 2019). So, before the COVID-19 Bulgarian economy was doing well. But in 2020, GDP growth was only 2.2 %, which is twice less than in 2015. The maximum growth for the period under review was observed in 2015 and was equal to 4 %. Traditionally an agricultural country, Bulgaria is now significantly industrialized. In fact, the agricultural sector accounts for only 3.2 % of GDP and employs 6.3 % of the workforce (World Bank, 2020). The main crops are sunflower, tobacco and wheat. About 46 % of the country's territory is considered agricultural land.

As a result of the COVID-19 pandemic, the Bulgarian government has implemented three special financing programs for agricultural enterprises that have encountered difficulties in optimizing their agricultural activities. Industry accounts for 21.6 % of GDP and 30.1 % of the labour force employed in the industrial sector. Industry continues to rely heavily on manufacturing subsectors (metallurgy, chemicals, engineering), which are estimated to account for 14 % of GDP (World Bank, 2020). The negative consequences of the COVID-19 pandemic are significant and affect all sectors of the Bulgarian economy, which has the greatest impact on the tourism sector. Exports of goods declined by 9 % in 2020; in 2021 it restores pre-crisis level. The same trend was observed in a large part of the manufacturing industry, especially in export-oriented enterprises. Exports of services declined between 25 % and 30 %, mainly due to a decrease in revenues from international tourism by more than 60 %. In 2021, the scenario envisages a partial resumption of tourism. Revenues are expected to remain 20-25 % lower than in pre-crisis 2019 (World Bank, 2020). Bulgaria is one of the European countries experiencing sharp jumps in inflation. After 2016, when inflation was negative, many factors contributed to the rise in further inflation. These include regulated commodity prices, fixed exchange rates and an increase in the share of domestic value-added goods abroad. Annual inflation fell to 1.2 % in 2020 due to the COVID-19 outbreak and a further drop in oil prices (World Bank, 2020). By 2019, the unemployment rate had returned to normal and was already 4.2 %. The unemployment rate was estimated at 5.6 % in 2020, strongly influenced by negative economic impact of the COVID-19 pandemic (World Bank, 2020). Bulgaria's budget deficit in 2019 amounted to 2.1 % of GDP. The government budget in 2020 recorded a deficit of 1.4 % of GDP, is expected to decline to 0.7 % in 2021 and 0.1 % in 2022 due to increased health care spending due to pandemic. As in every member state of the European Union, Bulgaria's national budget system performs its own functions, and the state budget complements the EU budget. The peculiarity of the interaction between the Union budget and Bulgarian budget is the practice of the predominance of financial income with the EU over payments from Bulgaria, stored on budgetary period 2014-2020. In addition, 25 September 2020, the European Council approved 511 million Euro of financial support (scheme SURE), which covers the increased cost of unemployment due to the pandemic.

The response to the COVID-19 pandemic triggered an unprecedented economic crisis in Ukraine as lockdown measures involved temporary closure of most businesses, particularly in the service sector, almost halting economic activity altogether except for the key sectors such as transport, food production and sale, agriculture, and pharmaceutical production and sale. The devastating disruption of global supply chains resulted in a sharp drop of business sales, household incomes and jobs. In agriculture, the most affected food supply chains are fruits and vegetables, milk and dairy, which experienced problems in transportation and storage, and retail. They also have difficulty in obtaining imported inputs (Sykov, 2020). Projections for Ukrainian GDP growth changed from +3 % in January to -6 % in July 2020, taking in consideration the temporary closure of domestic sectors, with the manufacturing, retail trade and transportation sectors hit particularly hard, and a strong contraction of domestic demand, exports and remittances. In case strict lockdown measures are prolonged or re-instated to mitigate a second wave of infections, assessments indicate greater long-term damage to economic fundamentals with a possible reduction of GDP by -11.2 % and of investment leading this decline. Forecasts point to a very weak external environment, supply-side disruptions, and a major slump in domestic demand (Assessment of the socioeconomic, 2020).

This pandemic is unprecedented, as evidenced by economic studies that have compared it to the past. The crisis caused by it has a different effect on the world economy, the most affected are those countries that should not. Reducing of all macroeconomic indicators are literally everywhere, all countries impose strict quarantine, but it was determined that the role played by duration rather than rigidity (positive experience of EU countries vs. negative Ukrainian). During the crisis, the economy is unable to stabilize and show a rapid return to normal on its own. The right reaction of national authorities in Baltic States and Bulgaria was the factor that contributed to the return of the economy to normal in 2021. Foreign exchange reserves will lose weight, because they are needed to invest in a crisis policy to stabilize the economy. But we should not forget that by starting the engine of the economy, investing countries and organizations will be able to return the money through the production of their own products.

Prognosis and Conclusion

The COVID-19 pandemic represents a new type of threat, the various groups of the consequences of which have yet to be assessed. The protracted nature of the pandemic will certainly lead to deepen the identified groups of consequences and the emergence of new approaches to the communication of this threat as an actual news feed.

Forecasts for the world economy are not optimistic. The three most significant recessions were the World War I, the Great Depression and the World War II; the scale of the predictions of the global economic downturn during the pandemic is comparable to the Great Depression of 1929-1930.

The authors of the research «The Extent of COVID-19 Pandemic Socio-Economic Impact on Global Poverty» (2020) argue that one of the consequences of this global economic depression will be an increase in price pressure which will resume in mid-2022 (Buheji, 2020). COVID poses a real threat to the UN Sustainable Development Goals for Poverty Reduction by 2030. By calculating per capita reductions in household income or consumption, the team identified three scenarios: low, medium, and high global declines of 5, 10, and 20 % for the three international poverty lines: $ 1.90, 3.20, and 5.50 per day. It is estimated that 1.4 billion people are in extreme poverty in developing countries. In some regions, the adverse effects of the COVID-19 pandemic could return poverty levels similar to those recorded 30 years ago. In the worst-case scenario of a 20 % reduction in income or consumption, the number of people living in poverty could increase by 420-580 million, compared to the latest official data for 2018 (Buheji, 2020).

From the first days of the pandemic, quarantine restrictions and closed borders were imposed in most countries of the world, and air services were suspended. Each country was left alone with the crisis, which unfortunately demonstrated the weakness and vulnerability of international agencies and institutions.

The pandemic temporarily destroyed freedom of movement within the Schengen area, helped to undermine solidarity against the background of growing national autonomy. The search for a mechanism to overcome the crisis in the world that survived COVID-19 remains a critical issue for the EU. Video conferencing and online talks have yielded no results other than the understanding that the EU will not follow the path of the 'corona- bonds'. Therefore, the poor EU countries will suffer the most, while the rich countries will be forced to focus on overcoming the consequences at home. Some countries are calling for a new Marshall Plan for Europe, appealing to the United States that they themselves are suffering from the epidemic. US involvement in European affairs is critical to solidarity within the Euro- Atlantic Alliance -- its absence could affect the willingness of European members to fulfil their responsibilities. Due to the economic crisis, plans to achieve 2 % of GDP expenditures on defence for a number of key European

NATO member states will be finally destroyed. Due to the pandemic, military coordination is weakened -- the Alliance's military exercises, including Defender Europe, are reduced in scale or abolished altogether (Kravchenko, 2020).

A major test of European solidarity was the violation, as a result of quarantine measures, of the normal conditions for the functioning of the four European freedoms: freedom of movement of goods, capital, labour and services, which is the foundation of the Common Market. Most of the quarantine measures are implemented by national authorities which gives grounds to talk about the 'renationalization' of European policy. As a result, a significant threat to European unity could be the strengthening of European sceptics of the far-right and far-left, especially in the countries of 'new' Europe.

Medical diplomacy (purchase of equipment and medical supplies) is extremely relevant today. And in the case of the EU, it is about promoting better internal coordination and international cooperation, through which they can seek a coronavirus vaccine and fight the effects of the crisis. Stories of interaction between EU member states (both old and new Europe) are actively promoted through diplomatic channels. In fact, countries are creating a new national image, which will be an important asset when the coronavirus passes. Another thing is how much this is noticed by ordinary citizens: they seem to be somewhat inclined to overestimate Chinese aid (according to a recent SWG poll, 52 % of citizens consider China to be Italy's best friend).

The need for a quick response and resolution of the crisis on its own provoked the beginning of changes primarily within states. B. Tertrais considers the tendency of strengthening sovereignty to be one of the most important consequences of the pandemic and the most logical solution for overcoming the crisis with the least losses. In support of his opinion, the scientist cites examples of the crises of 2000 and 2010, arguing that it is during critical circumstances that national societies are most inclined to demand from the government and the government greater protection from external threats to public security, in a broad sense from terrorism, wars and epidemics. These requirements will be met by strengthening the role of the state in the field of health and safety through economic intervention (Tertrais, 2020).

A similar opinion is shared in «7 early lessons from the corresponding coronavirus» by I. Krastev. He argues that the crisis with COVID-19 lead to the establishment of powerful states, influential 'big government', whose effectiveness will be evaluated for its ability to rescue the economy during the crisis and protect the citizens from the epidemic. The second important lesson is that the coronavirus demonstrates the so-called 'mysticism of borders', which will serve to strengthen the role of nation-states. Krastev demonstrates is an example of states of the European Union. With the closure of borders at the start of the pandemic in the spring 2020, every government in Europe had to focus only on its own people to ensure the safety of its own citizens. Under normal circumstances, member states do not distinguish between ethnic patients in their health system, but during the crisis they give priority of its citizens to other Europeans with EU passports. So, coronavirus strengthen nationalism. To survive, the government will ask citizens to build walls not just between states, but between people (Krastev, 2020).

At the same time, the pandemic has led to the revitalization of civil society, the growth of volunteer organizations and in the future may still contribute to positive changes in the political sphere of society. As a result of the current crisis, public institutions will receive a mandate to strengthen of the so-called 'deep state'. In the article of I. Todorov and N. Todorova the term 'deep state' has in mind all those highly skilled bureaucrats, diplomats, experts who work in government or even non-governmental institutions and combine two basic features: basic values and high professionalism. If the CO- VID crisis is not the last global challenge of the next years (very likely), the trend to strengthen government institutions in general and the 'deep state' in particular can become dominant. For international relations a new meaning of state institutions in the life of societies means strengthening the principle of 'every man for himself' or a new level of interaction between the 'deep states' of individual countries. The latter scenario may even lead to the formation of a 'deep global' that should not be confused with the UN and other current intergovernmental organizations. The question is not about the current international officials, but the global network which will have the ability to monitor and analyse the information. In the ideal case, these international formal or informal associations will have enough powers to adopt and implement decisions on the basis of a combination of the best of knowledge and intelligence of all mankind (Todorov & Todorova, 2020, p. 21).

Summing up all-EU's tendencies and the recent data of major economic indicators, the speed of economic recovery from the economic downturn caused by the pandemic in the Baltic States will depend on the duration and depth of internal quarantine measures, external environment, state support through fiscal and monetary policy, possible future changes in consumer and investor behaviour. The situation for certain industries will remain difficult; this may cause a new decrease in economics and the possible «V» shape scenario of crisis management in the Baltic States will not be fulfilled. The pace of economic growth is projected to pick up gradually in the years ahead.

The baseline scenario for Bulgaria is the fast, but partial recovery of most of the industrial production and of the services; the same time of services, including transport, entertainment, tourism, etc., report a slow growth in 2021. In 2020 GDP growth was only 2.2, twice less than in 2015. Bulgaria's external debt is expected to reach 22.2 % in 2022 (World Bank, 2020). During a pandemic Bulgaria's foreign debt is increased by 10 million dollars. The coronavirus crisis has hit the Bulgarian society hard. The pandemic came after a long rise in living standards, when unemployment and poverty fell to historically low levels. Despite widespread political support, the recession will have long-term consequences.

Ukraine was not expected to reach its pre-crisis levels until 2023-2024, but the War in 2022 dramatically changed all prognoses toward socio-economic recovery.

To conclude, the economic situation in the Baltic States and Bulgaria is not dramatic, although many industries and enterprises are facing serious problems. Consistent anti-crisis shields support domestic entrepreneurs, although, of course, assistance should be even greater, long-term and, above all, strategically designed for many years. The fight against the pandemic continues, and its economic consequences will be felt during next years as well.

The effectiveness of the individual response to the pandemic depends on the level of trust in society and the commitment of political leaders to learn, collaborate, consult and take principled decisions in times of uncertainty. This commitment to the common good determines the degree of public trust in leaders and institutions, which, in turn, affects citizens' willingness to comply with the restrictions to their daily lives imposed by the lockdown measures. This explains the difference in the impact of the pandemic within the EU. Bulgaria differs in these parameters from the Baltic countries and much closer to Ukraine (before February 24, 2022).

The economic and social consequences of the pandemic, rising unemployment and poverty, are already affecting the development of public relations today, and if governments fail to curb these effects, they could pose a serious challenge to international security in the future. Trends triggered by a pandemic could, if intensified, radically change the existing system of international relations. Significant relaxation of the process of globalization has become an impetus for change within, causing increasing trend 'sovereign- ism'. Thus, the biggest challenge to the COVID-19 pandemic may be its consequences and how the international community will be able to counter them.

The strengthening of sovereignty and nationalism poses certain threats at the national level too. First, the establishment of the above-mentioned strong, if necessary strong leadership during the crisis, threatens the establishment of a dictatorship; crisis and emergency minutes, but authoritarianism, including digital, may remain. Secondly, a total quarantine lockdown became possible only if the individual freedoms of each citizen were restricted, which caused dissatisfaction of many people, further intensified social tensions and revealed hidden problems that needed to be solved before, but became apparent during the crisis. This is supported by demonstrations against the quarantine, which took place from April 2020 in the USA, Germany, the Netherlands, etc.

The crisis exacerbated pre-existing mistrust in the health system, which is linked to the hardships people have experienced due to the health system's dysfunctions. There is high prevalence of conspiracy thinking in Bulgaria and Ukraine, which is normally considered a precursor to conflict escalation. The limited representation of women, social policy and human rights institutions among the members of the response coordinating bodies created a situation of discrimination as lockdown measures, imposed on every citizen, and de facto caused some groups to not be treated equally. The impact of emergency measures on fundamental freedoms and human rights was pervasive and diminished access for the most disadvantaged groups in particular. This increased inequalities and further diminished trust in established institutions, and the perceptions on access to political and civil rights, public information, the justice system, security, and the rule of law.

Answering the question of how international organizations, including the EU, influenced the course of the fight against the pandemic in Ukraine, it should be concluded that, in general, their role was significant and helped to prevent the worst-case scenario. However, like other crises, this current crisis has shown that actors in international relations seek to take advantage of the situation when weak countries ask for help and increase their dividends in the economic and diplomatic sphere. This applies not only to the Russian Federation and the PRC, but also to some extent to international financial organizations and the EU. Paradoxically, this makes the EU even more attractive in the eyes of Ukrainians. During the pandemic, they once again had the opportunity to see the benefits of belonging to the club of the rich, and therefore healthy.

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