The Albanian economy is expected to lose about 1.8 billion euros from the pandemic that has gripped the country and the world, as a result of the outbreak of Covid-19 infection.
In the 2020 revised budget tables, finances have downgraded the country’s gross domestic product (which measures the value of final goods and services produced by the economy over a period of time) to 1.58 trillion leks, or 12.7 billion euros.
Compared to the expectation at the end of 2019, when gross domestic product for this year was projected at ALL 1.79 trillion (EUR 14.5 billion), the decline is around EUR 1.8 billion. This is the amount that the economy is expected to lose from the almost total isolation of two months and the long-term consequences it left on the supply chain, industry, small businesses, consumption, employment, etc.
With this forecast, the government is approaching the EBRD expectation, which was the most pessimistic so far with an estimate of an economic decline of -9% this year.
While the International Monetary Fund and the EBRD predicted that the local economy would shrink by 5% this year, it would bring a loss of about 1.2 billion euros.
In the first quarter of the year, according to INSTAT, the economy fell by 2.52%, negatively affected by the earthquake, which hampered the construction and closure of the economy in the last three weeks of March. The contraction is expected to be higher in the second quarter, where for more than two months the whole country was in a strong quarantine and most of the businesses were closed. The Bank of Albania estimates that in the second half of the year, the country will be in negative territory. As a result, the country has been declining economically since 1997 (when it fell 10.2%).
Recovery is difficult to predict, as long as the virus is still in circulation, although the government has not given signals that it will restore restrictions.
The Bank of Albania has stated that in the circumstances we are in, the uncertainty in macroeconomic forecasts is relatively high, but nevertheless, in a basic scenario built on the premise of the disappearance of pandemics during 2020 and reasonable assumptions about the domestic and foreign environment, the Albanian economy is expected to recover from the losses suffered during the pandemic over the next two years. The Bank of Albania expects a relatively significant decline in 2020 and a return to positive territory of economic growth in 2021.
The Bank estimates that the COVID-19 pandemic has hit the Albanian economy hardest in the last two decades. This impact has macroeconomic impacts, in the form of declining economic activity, rising unemployment, and rising private and public debt.
The Ministry of Finance has recently revised the 2020 budget. The effects that Covid-19 has had on the local economy have forced the Ministry of Finance to radically change the 2020 budget. While revenues are expected to decline (-3% on an annual basis) and expenditures are planned to increase significantly (+ 18%), the budget deficit (the difference between income and expenditure) and public debt is expected to reach record levels, never seen before.