Pandemic is ripping up supply chains and may boost Europe’s east

There may be an upside for Europe’s east from the havoc wreaked on global supply chains by the coronavirus.

The pandemic’s early stages in China halted deliveries of key parts to manufacturers in Western economies. The cutoffs may prompt companies in those nations to safeguard against future issues by securing back-up capacity nearer home, according to the European Bank for Reconstruction and Development.

“The combination of this virus, which shows how concentrated the supplier base is for many companies in the world, with the uncertainty about trade policy will in my view lead to a rethinking about global value chains,” the London-based bank’s chief economist, Beata Javorcik, said in an interview.

Eastern Europe, the region the EBRD was set up to help transition from communism three decades ago, is well positioned benefit.

Its countries are on the doorstep of the continent’s more developed west, where companies from Airbus SE to Daimler AG are currently idling factories and car manufacturers have experienced disruptions in procuring components.

What’s more, workers are generally highly skilled, while many nations are either European Union members, have free-trade pacts with the bloc or are planning to join. Wages—while above the level of China—can also be a pull, often coming at $400 a month or less.

“Companies may look actually at places that have not been traditionally considered as a supplier base,” Javorcik said. “Why not Ukraine, why not Belarus and why not the Western Balkans?”