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World Bank: Albanian economy to shrink by 5% due to COVID-19 outbreak

Politiko 30 Prill 2020, 17:17
World Bank: Albanian economy to shrink by 5% due to COVID-19 outbreak

Albania’s economy is projected to contract by about 5% under the baseline scenario of how the COVID-19 pandemic unfolds in Europe, the World Bank (WB) stated on Wednesday presenting its semi-annual report on Southeast Europe. The baseline scenario assumes that that containment measures can be lifted by the end of June and gradual recovery can begin in the second half of 2020. The downside scenario assumes the outbreak lingers and containment measures can only be lifted at the end of August, with a recovery of economic activity only in the final quarter of 2020.

As for the entire Western Balkans region, the WB foresees that the economies of the six countries will contract between 3 to 5.6 percent. According to the WB, the recession in all Western Balkan countries will be driven by a significant drop in both domestic and foreign demand during the pandemic. Travel restrictions and social distancing measures have a particularly protracted impact on tourism and services, the latter accounting for around 50 percent of total employment in five countries in the region and 75 percent in Montenegro. Albania and Kosovo, the economies of which largely rely on service exports and tourism, will be hit significantly hard as their economies are projected to contract by about 5 percent, under the baseline scenario.

Bosnia, North Macedonia, and Serbia that have mostly export-oriented economies are expected to experience a slightly less significant slowdown; their economies may contract by 3.2 percent, 1.4 percent, and 2.5 percent respectively. On the other hand, under the downside scenario, Albania’s economy is expected to shrink by 6.9 percent while Kosovo’s economy would shrink by 11.3 percent. Linda Van Gelder, the WB Regional Director for Western Balkans, said that over the medium-term, growth is expected to rebound strongly in the region, as economic activity gradually returns to normal, but this also depends on the length and intensity of the current crisis, as well as what steps policymakers take to address this pandemic. According to the report, additional support may be necessary to support all vulnerable groups in the region. Policy responses should, therefore, be calibrated to mitigate the immediate effects, adjust to new realities that may emerge, and to leave space to prepare the economy for recovery.  

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