Krakowska Akademia im.

Andrzeja Frycza
Modrzewskiego

Macroeconomic analysis

Prepared by first-year student

Viktor Balashov

Krakow, 2021
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‘Foodies’
Online food ordering has become relatively common for us over the past 3
years. Now you don't have to go somewhere to eat your favorite dish - you can
do it by pressing a few buttons. Nevertheless, for any convenience in this life
you have to pay. Relatively, shipping prices are not that great and not too many
people can use this service on a daily basis. Let's define the target audience of
this service: it is obvious that most of all people use delivery in megalopolises.
It also turns out that the number of men and women among those ordering
ready-made meals is about the same. Among those who order food, there are
twice as many married and married people as unmarried (67% of respondents
versus 33%), 51% have children under 18, 79% have higher or incomplete
higher education. Most often, food is ordered at home (90% of respondents),
and not in the office, and for no reason, just so as not to cook it themselves
(62% of respondents). Less often - in connection with a special event (37%), to
have a snack in the office (23%) or during an unexpected visit from guests
(18%). Speaking about working days, 58% of respondents most often bring
lunch from home, 17% order food delivery, and 4% of respondents do not eat
lunch at all. Obviously, in order to make use of food delivery, we do not need to
sell all our real estate or ‘Google’ shares, for now we can limit ourselves with
our salary. And without any doubt, we can conclude that aggregate demand is
completely derived from a stream of income.
Let's put this business within the framework of different states with different
economic systems. But before that let`s take a look at the economic prospective
of food delivery businesses. Looking forward, the global online food delivery
market size is projected to exceed US$ 164.5 Billion by 2024, expanding at a
CAGR of 11.4% during 2019-2024.

So, let`s get started with Bulgaria.

The Covid-19 pandemic hit Bulgaria at a time when its economy was
performing well. Before the pandemic, a series of structural reforms, the highly
successful integration of Bulgarian manufacturing firms into world production
chains, and sound macroeconomic management had led to five years of growth
rates above three per cent, rapidly rising real wages, and historically low
unemployment. In 2020, the Bulgarian economy receded due to the COVID-19
outbreak, reporting a negative growth balance of 4.0%. According to the IMF's
October 2020 forecast, growth is expected to reach 4.1 % in 2021 and stabilize
at 3.7 % in 2022, subject to the post-pandemic global economic recovery. The
country's public finances are relatively strong, with a low debt-to-GDP ratio.
However, the effects of the Covid-19 crisis are clearly visible. Government debt
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was 24.1% of GDP in 2020. It is estimated slightly downwards at 23.7% in

2021 and is expected to reach 22.2% in 2022. Bulgaria's wage subsidy scheme
has protected jobs and household incomes from the worst of the impact, but the
Covid-19 shock has caused a drop in output not seen since the 1996-97 banking
crisis. The government budget in 2020 recorded a deficit of 1.4 % of GDP, is
expected to decline to 0.7 % for 2021 and 0.1 % for 2022. Annual inflation
dropped to 1.2% in 2020, due to the outbreak of COVID-19 and a further drop
in oil prices. It is expected to rise slightly to 1.7% in 2021 and 2.1% in 2022
(October 2020 World Economic Outlook).

The unemployment rate was estimated at 5.6% in 2020, strongly influenced by

the negative economic impact of the COVID-19 pandemic. The trend is
estimated to be downward to 4.5% in 2021 and 4.3% in 2022, according to the
IMF's October forecast. The number of people no longer actively seeking work
is increasing. Poverty is estimated to have declined from 8.5% in 2015 to 7.1%
in 2018. Nevertheless, the share of people at risk of poverty or social exclusion
is the highest in the EU at 32.8% in 2018. In 2020, GDP per capita for Bulgaria
was 9,826 US dollars. GDP per capita of Bulgaria increased from 1,797 US
dollars in 2001 to 9,826 US dollars in 2020 growing at an average annual rate of
9.96%. In addition, income inequality in Bulgaria is by far the highest in the
EU.

Indicator of Economic Freedom

World Rank: 35
Business environment ranking
World Rank: 61/82
To summarize, Bulgaria is a fairly developed country in comparison with other
states, however, so far, its economic condition does not allow it to lead among
the countries of the European Union. I also want to note the fact that the
coronavirus pandemic has become a significant economic shock for almost all
states, including Bulgaria. Over the past year, absolutely all macroeconomic
indicators have suffered, without exception, but, nevertheless, Bulgaria in recent
years has shown a fairly stable and measured growth.

Croatia
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Its economy accelerated in 2019 driven mainly by domestic demand and public
investment supported by EU funds. However, it was severely hit by the
economic crisis linked to the covid-19 pandemic. According to the IMF's
updated October 2020 forecast, growth was supposed to fall to -9% in 2020,
while it is projected to rebound to 6% in 2021 and stabilize at 4.4% in 2022,
subject to the post-pandemic global economic recovery. Anyway, Croatia has
put in place two schemes with an estimated total budget of EUR 1 billion to
support businesses affected by the coronavirus outbreak. Public support will
take the form of interest-free loans and low-interest loans, respectively.
The schemes were approved under the State aid Temporary Framework adopted
by the Commission on 19 March 2020. Inflation decreased from 0.3% in 2020,
and is expected to increase slightly this year (to around 0.8%) and next (to
1.1%).
But Croatia has a relatively high unemployment rate.
According to IMF estimates, unemployment increased to 9.3% in 2020, heavily
influenced by the negative economic impact of the COVID-19 pandemic. The
Croatian Labor Institute reported approximately 150,000 unemployed persons
in December 2020, accounting for a 21.3% increase in the number of registered
unemployed persons compared to December 2019. The trend is expected to
increase in 2021 to 10.3%, and to decrease to 9.6% in 2020. The Ministry of
Labor and Pension System prolonged its employment subsidy programme until
the end of February 2021. Though the average revenue of Croatians is still
below the European average, Croatia remains the second most developed
economy of the Balkan region, after Slovenia.
At 65.2 percent of the EU27 GDP per capita in 2019 (purchasing power parity),
Croatia still lags behind its EU peers. On the fiscal front, the surge in public
debt in 2020, reflecting the economic downturn and a large fiscal stimulus
package, calls for fiscal prudence and greater efforts to increase the
effectiveness and efficiency of public spending over the coming years.
ALSO, DUE TO CORONAVIRUS PANDEMIC poverty is estimated to
increase to 2.6 percent in 2021, with approximately 14,000 additional Croatians
living on less than US$5.5 a day at 2011 PPP prices. But economic situation is
projected to gradually recover; A continued rise in economic activity and a
phasing out of the fiscal support measures should reduce the fiscal deficit and
bring public debt below 80 percent of GDP by 2023. The gradual recovery is
expected to reduce poverty. However, the compounded impacts of the crisis and
the low savings rate among working poor households could mean a longer
recovery process for this vulnerable group.
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Indicator of Economic Freedom

World Rank: 79
Business environment ranking
World Rank: 38/82

Poland
Poland has emerged as a dynamic market over the past 25 years and has become
a major actor within Europe, being the tenth-largest economy in the EU. The
country performed well during the 2014-19 period, with the real GDP growth
rate generally exceeding 3%, driven by private consumption. In the second
quarter of 2020, however, the spread of COVID-19 and the restrictions that
followed caused a real GDP contraction of 8.9% quarter-on-quarter.
Nevertheless, the country’s reacted well in Q3, with increases in industrial
production, exports and household consumption, thus resulting in an overall
GDP loss of 3.6 for the year 2020, a smaller decline compared to the EU
average. As foreign demand should increase, the Polish economy is expected to
turn to growth this year (+4.6%) and in 2022 (+4.5% - IMF's October 2020
forecast), though much will depend on the global economic and sanitary
recovery. In its most recent January 2021 update of the World Economic
Outlook, the IMF has revised its GDP growth projections for Poland to 2.7% in
2021 and 5.1% in 2022 (representing a difference from October 2020 WEO
projections of -1.9% and +0.6%, respectively). The unemployment rate has been
structurally low (just above 3%), though more than one in four employees have
temporary contracts, twice the EU average. However, the situation is expected
to worsen due to the long-term effects of the COVID-19 crisis: while
governmental support measures helped to contain unemployment (3.8% in
2020), the IMF forecasts the rate to increase to 5.1% this year and 4.9% in
2022. According to the latest data by Eurostat, the GDP per capita (PPP) of
Polish citizens is still 27% lower than that of the EU-27. Finally, there are still
large disparities between the east and the west of the country.
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Indicator of Economic Freedom

World Rank: 41
Business environment ranking
World Rank: 40/82

To sum up, Poland's economy is the sixth in the EU. The country is
considered convenient for doing business and has a competent
macroeconomic policy. Since 1990, the country has pursued a policy of
economic liberalization. During the 2008-2009 crisis. Poland was the only
country to avoid an economic downturn, largely thanks to the government's
weakened fiscal policy and commitments to cut spending over the medium
term. The main sectors of the Polish economy are services (64.3% of GDP) and
industry (31.2% of GDP). The remaining 4.5% of GDP is agriculture. Small and
medium-sized enterprises play a very important role in creating the country's
GDP.

Russia
After several years of negative growth due to massive capital flight, the collapse
of the rouble, falling oil prices and trade sanctions imposed by the West after
the Ukrainian crisis, the Russian economy had returned to modest growth since
2017, driven mainly by mineral resource extraction and private consumption.
However, due to the COVID-19 pandemic, the economy contracted to -4.1%
GDP in 2020 (from +1.3% in 2019), as exports, investment activity and
consumer demand all plunge. According to the IMF's October 2020 forecast, the
economy is expected to rebound in 2021 (+2.8%) and 2022 (+2.3%), supported
by fiscal and monetary stimulus and assuming the situation gradually
normalizes. In its most recent January 2021 update of the World Economic
Outlook, the IMF has revised its GDP growth projections for Russia to 3% in
2021 and 3.9% in 2022 (representing a difference from October 2020 WEO
projections of +0.2% and +1.6%, respectively).
Since the 2015-2016 recession, the government has pursued a prudent
macroeconomic policy aimed at maintaining financial stability, and the central
bank has carefully controlled inflation. Hence, the Russian economy entered the
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COVID-19 crisis with a sound fiscal framework and substantial policy space
(IMF). The public debt level, which was low in 2019 (13.9% GDP), increased
to 18.9% GDP in 2020, and is expected to remain around 19% GDP in 2021 and
18.5% GDP in 2022 (IMF). In addition, Russia benefits from substantial savings
in the National Wealth Fund. From a surplus of 2% GDP in 2019, the public
finances registered a deficit of -3.5% GDP in 2020, but are expected to recover
to -1.8% GDP in 2021 and -0.7% in 2022 (IMF). Inflation decreased from 4.5%
in 2019 to 3.2% in 2020, and is forecast to stay at this level in 2021 and 2022
(IMF). In response to the crisis, the Russian authorities adopted a strong public
health and economic package, amounted to about 3.5% GDP (IMF). Measures
included expanded social and unemployment benefits. Bringing the COVID-19
pandemic under control and avoiding lasting damage to the economy is the
main priority, but for 2021 Russia has planned to scale down its state support of
the economy and consolidate its fiscal policy in order to return to the budget
rule by 2022. Russia faces many challenges: a large state footprint, weak
governance and institutions, insufficient infrastructure, low levels of
competitiveness, underinvestment, low production capacity, dependence on raw
materials, poor economic climate, lack of structural reforms and ageing of the
population.
The unemployment rate, estimated by the IMF at 4.6% in 2019, was falling
before the COVID-19 crisis, but real wages had also fallen. Social inequalities
remain high, especially between large cities and rural areas. Only 1% of the
population owns around 70% of private assets. Despite the
emergence of an urban middle class, the poverty rate remains at around 13%. A
middle-class protest movement calls for an end to corruption and patronage.
According to IMF estimates, the unemployment rate increased to 5.6% in 2020
under the effect of the pandemic, but should gradually decrease to 5.2% in 2021
and 4.7% in 2022.

Indicator of Economic Freedom

World Rank: 98
Business environment ranking
World Rank: 60/82
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I am always based on cold calculations and the two indices above indicate that it
is better to refrain from any business not only in Russia, but also in a number of
other states of the post-Soviet space.

Turkey
Turkey's GDP had already grown below projections at 4.5% in the first quarter
of 2020 before shrinking by 9.9% in April-June at the height of the pandemic.
Turkey's strong hospital infrastructure limited the extent of Covid-19 cases and
deaths but demand and employment contracted sharply well into the third
quarter. The government introduced a series of support measures, both on micro
and macroeconomic level, launching unemployment schemes, unpaid leave
subsidies as well as subsidized credit lines to individuals. The central bank
adopted an expansionary monetary stance, supporting the lending capacity;
however, this resulted in interest rates falling below market expectations and a
rapid decline in the value of the lira. The central bank's foreign reserves dipped
in the first 10 months in line with the expansionary policy. The government
took an almost complete U-turn in November, appointing a new chairman to the
central bank as well as a new finance minister, which halted the expansionary
policy and led to a partial recovery of the value of the lira. At the same time,
government support measures supported manufacturing activity, which not only
recovered from its nadir in the second quarter but also rose on the year in the
fourth quarter. Nonetheless, Turkey's macroeconomic balance mostly worsened
on the year, with its current account extending a deficit of nearly USD 24
billion, compared with a surplus of USD 8.9 billion in 2019. The deficit is
projected to narrow to USD 5.8 billion in 2021; however, this will depend on
external factors, including a recovery of international trade and tourist activity.
General government gross debt, while remaining low, continued to rise and was
estimated to reach 41.7% of GDP by the end of 2020 from 33% a year earlier.
The unemployment rate had already reached 14.6% at the end of 2020 and was
impacted by Covid-19 as most businesses remained closed for months whereas
tourism - a major source of employment - took a nosedive. Youth
unemployment, which peaked at 26.1% in June 2020, fell back to 24.9% by
October. Wage inequality and the size of the informal sector remain as long-
standing problems.

Indicator of Economic Freedom

World Rank:68
Business environment ranking
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World Rank:44/82
Turkey is embroiled in a number of regional conflicts and relations with the
West are poor. The government's assertive foreign policy and unorthodox
economic policies have eroded investor confidence and the lira is weak. Turkey
has large external financing needs, and its private sector is heavily indebted in
foreign currency, raising risks to financial stability. The high unemployment
rate is also a little worrisome. Therefore, for now, it is worth postponing the
opening of a business.

Ukraine
Until February 2020, the Ukrainian economy was still in a robust
macroeconomic state thanks to the successful implementation of a reform
program, with declining public debt, falling inflation and positive growth
forecasts, but the outbreak of the pandemic and the government reshuffle
darkened the outlook (Euler Hermes). Declining nominal GDP and Covid-19-
related fiscal stimulus widened the fiscal deficit, reaching -4.5% GDP in 2020
(from -1.8% in 2019) and projected to amount -3.8% GDP in 2021 and -3%
GDP in 2022 (IMF). Public debt increased significantly, from 50.1% GDP in
2019 to 65.7% GDP in 2020, and is expected to stay high in 2021 (64.3% GDP)
and 2022 (61.8% GDP) (IMF). During the first nine months of 2020, the
hryvnya lost -16% vs. the USD (Euler Hermes), but inflation declined to 3.2%
in 2020 (from 7.9% in 2019) due to the easing of energy and food prices.
Inflation is expected to increase again to 6% in 2021 and 5.7% in 2022 (IMF).
In June 2020, the IMF approved a USD 5 billion support package to help
Ukraine to cope with COVID-19 pandemic challenges. Policies under the new
arrangement focus on four priorities: mitigating the economic impact of the
crisis; ensuring continued central bank independence and a flexible exchange
rate; safeguarding financial stability while recovering the costs from bank
resolutions; and moving forward with key governance and anti-corruption
measures to preserve and deepen recent gains (IMF). The 2021 budget priorities
include healthcare, purchase of vaccines from COVID-19, increasing the
minimum wage, salaries and pensions, education and agriculture.
Ukraine's unemployment rate was falling until 2019, but due to the negative
economic impact of the COVID-19 pandemic, it is estimated to have increased
to 11% in 2020 and is forecast to stay high in 2021 (9.6%) and 2022 (9%)
(IMF). The informal sector in Ukraine is estimated to account for a third of the
country's GDP, and GDP per capita (at purchasing power parity) is only 20% of
the EU average.
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Indicator of Economic Freedom

World Rank:147
Business environment ranking
World Rank:72/82
As a citizen of Ukraine, I can more or less accurately assess the situation in this
country. The economic and political situation is more than unstable.
Unfortunately, the geographical location of this country is both a great
advantage and a heavy burden. Regional institutions are drowning in corruption,
which, oddly enough, is the main obstacle to starting a business. Ukraine still
hasn't recovered from the secession in 2014. Moreover, the covid-19 pandemic
has had a profound impact on both the macroeconomic and microeconomic
components. A lot of businesses simply did not survive this blow. Even one-off
state subsidies to small businesses in the amount of 8 thousand hryvnia ($290).

France
In 2020, France ranked as the world’s seventh largest economic power, just
behind the United Kingdom and India. The country’s recovery from the 2008
economic crisis has come later than in other European countries and remained
fragile due to structural imbalances. In 2020, due to the COVID-19 pandemic,
France suffered one of the sharpest economic contractions among EU countries.
According to IMF estimates, GDP growth contracted by nearly -19% in the
second quarter of 2020. During the whole year 2020, output declined by -8.2%
as economic activity rebound during the third quarter. According to the IMF's
April 2021 forecast, GDP growth is estimated at 5.8% in 2021 before slowing
down to 4.2% in 2022, subject to the post-pandemic global economic recovery.
Private consumption and investment activity should benefit from the fiscal
stimulus measures, while firming global demand should boost exports.
However, a prolongation of the health crisis into 2021 could delay economic
recovery.
In 2020, France was among the most affected countries from the COVID-19
pandemic. The authorities responded by implementing two stringent lock-down
measures in March and in October, and the budget was amended several times
to adapt to the crisis. A large emergency support package, which focuses on
supporting households and firms by preserving jobs and providing liquidity,
was adopted. As a result of these support measures and falling revenues, budget
deficit increased to -3.6% GDP in 2020, from -2% GDP in 2019, and is forecast
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to remain at a high level in 2021 (-5.2% GDP) and 2022 (-4% GDP) (IMF).
Public debt, which was already one of the highest in the eurozone, soared from
98.1% GDP in 2019 to 113.5% GDP in 2020, and is forecast to reach 115.2%
GDP in 2021 and 114.3% GDP in 2022. Inflation decreased from 1.3% in 2019
to 0.5% in 2020, and is expected to remain low in 2021 (1.1%) and 2022
(1.2%). The current account deteriorated significantly as exports fell faster than
imports. The priorities for 2021 will include deploying the vaccination plan as
well as implementing the recovery plan to support French businesses, minimize
the rise in unemployment, and facilitate the green and digital transitions as
outlined in the Plan de Relance. In addition to the risk posed by a prolongation
of the health crisis into 2021, France faces structural challenges: high structural
unemployment, weak competitiveness, and high public and private debt
burdens. High unemployment rates, especially among youth, remain a growing
concern for policymakers.
Unemployment rate, which was declining before the pandemic, reached an
estimated 8.2% in 2020 and is expected to increase to 9.1% in 2021 and 9.2% in
2022 (IMF). Social mobility remains low and the employment rates of many
disadvantaged groups are poor. The labor reform passed in 2017 aimed at
injecting more flexibility in the labor market.

Indicator of Economic Freedom

World Rank: 71
Business environment ranking
World Rank:24/82
Italy
Italy is fourth in the ranking of economically developed countries of the
European Union and eighth in the world in 2020-2021. The Italian economy is a
post-industrial mixed model that continues to develop actively. With a
population of over 61 million, Italy's GDP is estimated at about US $ 30,000 per
person per year, which is considered a high figure. GDP per capita continues to
grow. The share of state capital in the field of industry is significant, therefore
the sectoral structure of the Italian economy is a state-monopoly form of
government.
The private-state economy of Italy allows to attract many investors. Such a
mixed system guarantees them safe transactions, a stable and acceptable,
controlled price level. The state ensures the containment of inflation, which is
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no more than 3% here, creating a favorable investment climate in general. At

the same time, the Italian economic system allows the introduction of
innovative, bold solutions in the development of technological processes in the
creation of goods, as well as related products. Thanks to the well-established
processes of its own production, the release of the necessary equipment,
machine tools for creating new products, the investment atmosphere for foreign
businessmen is quite favorable.
Despite the fact that Italy is in the eighth place in the world ranking
for quality of life, there are still problems here:
After joining the European Union, under the pressure of competition from other
member states, clusters were formed, underdeveloped types of activity were
displaced and replaced by others. Following this, Italy's external debt increased,
and economic ties between the northern and southern parts of the country were
severed. The European Union provided a loan to contribute to the economy of
the latter, but this only increased the external debt.
Istat draws attention to the fact that against the backdrop of the economic crisis,
declining employment and rising unemployment in Italy, the share of the
economically inactive population began to increase, which amounted to 36.1%
in December. Over the past 12 months, the number of those between the ages of
15 and 64 who neither work nor study has grown by 482 thousand. During the
same time, the number of people looking for work has decreased by 222
thousand.

Indicator of Economic Freedom

World Rank: 80
Business environment ranking
World Rank: 48/82
Latvia
Latvia's macroeconomic indicators are generally positive, as the country
pursued tax and labor reforms in accordance with its stability programme for the
period 2018-21. Temporary stimulus measures taken to offset the effects of the
COVID-19 crisis (estimated at around 4% of GDP) caused an increase in the
budget deficit, which stood at 4.1% in 2020 (from 1.5% one year earlier). In
2021, the public deficit is expected to widen to 5.6 % of GDP as support
measures continue. The government debt-to-GDP ratio increased from 45.5% in
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2020 to 47.2% in 2021 (IMF estimates). As the economy recovers and

government borrowing shrinks, it is expected to start declining again from 2022
(45.3%).
According to the IMF, the unemployment rate increased to 8.2% in 2020, due to
the negative economic impact of the COVID-19 pandemic, and should decrease
to 7.2% in 2021. Furthermore, the Latvian economy is negatively impacted by a
demographic challenge: the country has one of the lowest population growth
rates in the EU (-0.8% in 2018 - World Bank, latest data available), with birth
numbers declining continuously. Moreover, Latvia has to face a strong
emigration of skilled youth. The latest data published by the Central Statistical
Bureau (CSB) show that 21.6 % of the country’s population were at risk of
poverty in 2019.
The Latvian economy is driven by the services sector which contributes
64.7% of GDP and employs 70% of the active population. Thanks to its
attractive fiscal regulation, Latvia has developed a large financial services
sector.

Indicator of Economic Freedom

World Rank: 35
Business environment ranking
World Rank: 39/82

Conclusion:
This analysis not so much measures the rate of development of a particular
state, but also its stability and adaptability to ‘Black Swans’. Although the task
of this analysis was to show which of the states is the best environment for
creating a business, all this smoothly flows into an alternative task ‘to show
whose ‘economic and political armor’ is stronger and how the state supports
small business sector and whether it supports it at all’. But it is also need to
remember that food delivery institutions (if we consider covid-19 pandemic) are
not really fragile. As Nassim Nicholas Taleb wrote in his book
‘Antifragile’:
‘Antifragility is the ability to benefit from stressful situations and
change. If there is a problem, invulnerability reflects and remains
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the same. Antifragility benefits from the problem and changes for
the better.’
Anyway, taking into account several macroeconomic variables it is possible to
define the best country food delivery business and the worst one:
So, I always act on the principle of 'Minimal risks and stability'. And analyzing
all these countries, I came to the conclusion that the best country will be Poland.
As, you already noticed I used two important indicators to understand
superficially where the economical environment will be successfully
developing: Indicator of Economic Freedom and Business environment
ranking, but I must emphasize that looking at these both indicators is not
enough, but ALSO, WE ALWAYS NEED TO LOOK AT THE DYNAMICS
OF THE LAST 5 YEARS TO DEFINE ITS CONDITION PRECISELY!
And for the worst place to start business I have two candidates: Russia and
Ukraine. The main factor for both countries that makes them the worst
places to start different types of business is corruption. I agree, that, of
course this has nothing to do with macroeconomics but this is really affects
small business sector. Here lies not so much an economic aspect, but a
political one. The fact is that any push from the outside for Ukraine can
turn into an economic disaster. It is just unstable, that's all. For Russia, I
take into account escalation between this country against USA + European
Union countries.