After the International Monetary Fund, the World Bank has predicted that the Albanian economy will fall by 5% this year, exacerbated by the initial expectation of -1.5%.
The decrease is 5% for the basic scenario, but if the crisis lasts for the second 6 months, the contraction of the Albanian economy would be 7%.
The Regular Economic Report for the Western Balkans was presented digitally today. The report focuses on the macroeconomic impact of COVID-19 pandemics in these countries. The Western Balkans region is expected to fall into recession in 2020, with all six countries predicting negative economic growth as efforts continue to address the economic effects of COVID-19 pandemics.
Regarding Albania, the main messages of the report are:
-Two successive shocks with devastating consequences: the November 2019 earthquake and the COVID-19 pandemic 'have frozen' much of the economy. If most economic activity could resume in early summer, annual GDP growth is expected to shrink by 5 percent by 2020.
- The Albanian government has taken a series of measures to support the economy and mitigate its consequences in people's lives. A quick and well-thought-out implementation would increase the effectiveness of these measures.
- After the crisis is overcome, the normalization of economic activity and the reconstruction process to mitigate the consequences of the earthquake is expected to support rapid growth, but in the medium term, it is necessary the structural reforms continue.
Albania's greatest sensitivity in the labor market
The World Bank has published a Data Map of Relative Sensitivity to COVID-19 of the Western Balkans. Albania has the greatest sensitivity in the labor market for two reasons:
-First, for the high level of self-employment, with 34.7% of the total and secondly with informal employment (% of the total number of employees), which is 61%, a record in the Balkans.
Albania ranks better in terms of the financial sector.
In external weaknesses, it is most affected in exports of services and in tourism.
The effect on tourism
The recession will be particularly severe in Montenegro, Albania, and Kosovo due to their dependence on tourism. Globally, according to the latest UNITO assumption, the decline in the number of international tourists could reach up to 30 percent, much higher than the global decline of 4 percent recorded in 2009. According to the basic scenario, Albania, Kosovo and Montenegro will experience a 20-35 percent reduction in tourism revenue by 2020, and this will have a significant negative impact on their economic growth in 2020 because, for all three countries, direct and indirect tourism revenue is estimated that makeup 15 to more than 25 percent of GDP. Economic recovery in transport and tourism is also expected to be more gradual, so the growth during the second half of the year will not offset the losses of the summer season. Only Kosovar tourism can resume sooner after the ease of travel restrictions, as 80 percent of its travel service exports are driven by diaspora tourism.
Covid's effects
The COVID-19 crisis has serious consequences for the economies of the Western Balkan countries, as aggregate supply and aggregate demand are shrinking at the same time. Not only government restrictions, but also the reaction of families and businesses to the crisis are exerting unprecedented pressure on the region's economies. The decline in economic activity has also brought problems for public finances and increased the need for government funding.
After the International Monetary Fund, the World Bank has predicted that the Albanian economy will fall by 5% this year, exacerbated by the initial expectation of -1.5%.
The decrease is 5% for the basic scenario, but if the crisis lasts for the second 6 months, the contraction of the Albanian economy would be 7%.
The Regular Economic Report for the Western Balkans was presented digitally today. The report focuses on the macroeconomic impact of COVID-19 pandemics in these countries. The Western Balkans region is expected to fall into recession in 2020, with all six countries predicting negative economic growth as efforts continue to address the economic effects of COVID-19 pandemics.
Albania's greatest sensitivity in the labor market
The World Bank has published a Data Map of Relative Sensitivity to COVID-19 of the Western Balkans. Albania has the greatest sensitivity in the labor market for two reasons:
-First, for the high level of self-employment, with 34.7% of the total and secondly with informal employment (% of the total number of employees), which is 61%, a record in the Balkans.
Albania ranks better in terms of the financial sector.
In external weaknesses, it is most affected in exports of services and in tourism.
Covid's effects in the Balkans
The COVID-19 crisis has serious consequences for the economies of the Western Balkan countries, as aggregate supply and aggregate demand are shrinking at the same time. Not only government restrictions, but also the reaction of families and businesses to the crisis are exerting unprecedented pressure on the region's economies. The decline in economic activity has also brought problems for public finances and increased the need for government funding.
The aggregate supply is also shrinking. Restrictions imposed by governments oblige businesses and companies with non-vital activity, which cannot meet the conditions for social distancing, to remain closed or reduce activity in order to prevent the outbreak of the pandemic. Although some businesses may continue to operate through sales or online work, most of them will experience declining productivity. Some employees have to stay home to take care of their children because of the closure of schools or because they have to implement social distancing to avoid infection. Interruptions in domestic and international supply chains undermine productive activity. Falling commodity prices affect the decline in profit margins in the extractive industries. Liquidity restrictions can cause further disruption in production.
The hardest-hit sector is expected to be serviced, especially those that require physical interaction. Government restrictions have forced the closure of most hosting services, retail and physical presence. Restrictions on passenger transport aimed at avoiding close contact between passengers, such as buses, trains and airplanes, have severely damaged the sector. For almost the same reasons, tourism is collapsing; even after the crisis is brought under control, it will take time for tourism to revive. On the other hand, the manufacturing industry is suffering due to protective measures of social distancing which cause barriers to production, declining orders and problems in the supply chain. Relatively stronger are key sectors such as medicine, the food supply chain, the public sector and the sectors where online work can be done, such as professional services related to the digital economy.
This crisis is different:
This is a blow to the health system as a whole, which requires temporary, conscious and necessary freezing of activity in order to slow down the spread of the virus. The duration and depth of the crisis will depend on the effectiveness of the restrictive measures, the ability of the health system to cope with the outbreak, as well as the success in developing effective treatments and vaccines for the disease.
Economic policies are not enough to end the crisis, but do play an essential role: protect livelihoods by protecting jobs and strengthening the social security network.
A quick economic recovery is possible, but not certain. Facilitating isolation measures could unblock outdated consumption and investment, which would encourage economic recovery. But the shock may have severely impaired productivity in the medium term, as freezing economic activity and lack of liquidity forced the closure of consolidated businesses, the breakdown of productive relations in the supply chain, or the departure of employees with considerable knowledge of the work processes.
If the threat from the virus were to persist in time, concerns about the recurrence of the epidemic and restrictive measures would overshadow economic recovery.
In order to mitigate the effects of the crisis, the countries of the Western Balkans have announced significant fiscal packages ranging from 1 to 7 percent of GDP (not including guarantees) to support citizens and businesses.
The decrease is 5% for the basic scenario, but if the crisis lasts for the second 6 months, the contraction of the Albanian economy would be 7%.
The Regular Economic Report for the Western Balkans was presented digitally today. The report focuses on the macroeconomic impact of COVID-19 pandemics in these countries. The Western Balkans region is expected to fall into recession in 2020, with all six countries predicting negative economic growth as efforts continue to address the economic effects of COVID-19 pandemics.
Regarding Albania, the main messages of the report are:
-Two successive shocks with devastating consequences: the November 2019 earthquake and the COVID-19 pandemic 'have frozen' much of the economy. If most economic activity could resume in early summer, annual GDP growth is expected to shrink by 5 percent by 2020.
- The Albanian government has taken a series of measures to support the economy and mitigate its consequences in people's lives. A quick and well-thought-out implementation would increase the effectiveness of these measures.
- After the crisis is overcome, the normalization of economic activity and the reconstruction process to mitigate the consequences of the earthquake is expected to support rapid growth, but in the medium term, it is necessary the structural reforms continue.
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| Graph of real GDP growth for 2020 in Balkans |
The World Bank has published a Data Map of Relative Sensitivity to COVID-19 of the Western Balkans. Albania has the greatest sensitivity in the labor market for two reasons:
-First, for the high level of self-employment, with 34.7% of the total and secondly with informal employment (% of the total number of employees), which is 61%, a record in the Balkans.
Albania ranks better in terms of the financial sector.
In external weaknesses, it is most affected in exports of services and in tourism.
The effect on tourism
The recession will be particularly severe in Montenegro, Albania, and Kosovo due to their dependence on tourism. Globally, according to the latest UNITO assumption, the decline in the number of international tourists could reach up to 30 percent, much higher than the global decline of 4 percent recorded in 2009. According to the basic scenario, Albania, Kosovo and Montenegro will experience a 20-35 percent reduction in tourism revenue by 2020, and this will have a significant negative impact on their economic growth in 2020 because, for all three countries, direct and indirect tourism revenue is estimated that makeup 15 to more than 25 percent of GDP. Economic recovery in transport and tourism is also expected to be more gradual, so the growth during the second half of the year will not offset the losses of the summer season. Only Kosovar tourism can resume sooner after the ease of travel restrictions, as 80 percent of its travel service exports are driven by diaspora tourism.
Covid's effects
The COVID-19 crisis has serious consequences for the economies of the Western Balkan countries, as aggregate supply and aggregate demand are shrinking at the same time. Not only government restrictions, but also the reaction of families and businesses to the crisis are exerting unprecedented pressure on the region's economies. The decline in economic activity has also brought problems for public finances and increased the need for government funding.
After the International Monetary Fund, the World Bank has predicted that the Albanian economy will fall by 5% this year, exacerbated by the initial expectation of -1.5%.
The decrease is 5% for the basic scenario, but if the crisis lasts for the second 6 months, the contraction of the Albanian economy would be 7%.
The Regular Economic Report for the Western Balkans was presented digitally today. The report focuses on the macroeconomic impact of COVID-19 pandemics in these countries. The Western Balkans region is expected to fall into recession in 2020, with all six countries predicting negative economic growth as efforts continue to address the economic effects of COVID-19 pandemics.
Albania's greatest sensitivity in the labor market
The World Bank has published a Data Map of Relative Sensitivity to COVID-19 of the Western Balkans. Albania has the greatest sensitivity in the labor market for two reasons:
-First, for the high level of self-employment, with 34.7% of the total and secondly with informal employment (% of the total number of employees), which is 61%, a record in the Balkans.
Albania ranks better in terms of the financial sector.
In external weaknesses, it is most affected in exports of services and in tourism.
Covid's effects in the Balkans
The COVID-19 crisis has serious consequences for the economies of the Western Balkan countries, as aggregate supply and aggregate demand are shrinking at the same time. Not only government restrictions, but also the reaction of families and businesses to the crisis are exerting unprecedented pressure on the region's economies. The decline in economic activity has also brought problems for public finances and increased the need for government funding.
The aggregate supply is also shrinking. Restrictions imposed by governments oblige businesses and companies with non-vital activity, which cannot meet the conditions for social distancing, to remain closed or reduce activity in order to prevent the outbreak of the pandemic. Although some businesses may continue to operate through sales or online work, most of them will experience declining productivity. Some employees have to stay home to take care of their children because of the closure of schools or because they have to implement social distancing to avoid infection. Interruptions in domestic and international supply chains undermine productive activity. Falling commodity prices affect the decline in profit margins in the extractive industries. Liquidity restrictions can cause further disruption in production.
The hardest-hit sector is expected to be serviced, especially those that require physical interaction. Government restrictions have forced the closure of most hosting services, retail and physical presence. Restrictions on passenger transport aimed at avoiding close contact between passengers, such as buses, trains and airplanes, have severely damaged the sector. For almost the same reasons, tourism is collapsing; even after the crisis is brought under control, it will take time for tourism to revive. On the other hand, the manufacturing industry is suffering due to protective measures of social distancing which cause barriers to production, declining orders and problems in the supply chain. Relatively stronger are key sectors such as medicine, the food supply chain, the public sector and the sectors where online work can be done, such as professional services related to the digital economy.
This crisis is different:
This is a blow to the health system as a whole, which requires temporary, conscious and necessary freezing of activity in order to slow down the spread of the virus. The duration and depth of the crisis will depend on the effectiveness of the restrictive measures, the ability of the health system to cope with the outbreak, as well as the success in developing effective treatments and vaccines for the disease.
Economic policies are not enough to end the crisis, but do play an essential role: protect livelihoods by protecting jobs and strengthening the social security network.
A quick economic recovery is possible, but not certain. Facilitating isolation measures could unblock outdated consumption and investment, which would encourage economic recovery. But the shock may have severely impaired productivity in the medium term, as freezing economic activity and lack of liquidity forced the closure of consolidated businesses, the breakdown of productive relations in the supply chain, or the departure of employees with considerable knowledge of the work processes.
If the threat from the virus were to persist in time, concerns about the recurrence of the epidemic and restrictive measures would overshadow economic recovery.
In order to mitigate the effects of the crisis, the countries of the Western Balkans have announced significant fiscal packages ranging from 1 to 7 percent of GDP (not including guarantees) to support citizens and businesses.