The economic recovery of the country after the removal of the blocking measures caused by the Covid-19 pandemic is being slow while the negative consequences were fast and strong, analyzed the Bank of Albania in the Monetary Policy report for the third quarter of the year.
The Bank of Albania forecasts a contraction of economic activity during 2020. The decline in economic activity is expected to peak in the second quarter of the year, caused by the closure of non-core economic activities and the decline in household and business incomes.
Facilitating measures to limit the spread of the pandemic will pave the way for economic recovery, although economic growth is expected to remain in negative territory in the last two quarters of the year.
Rising uncertainty about employment and demand prospects, declining incomes, and the continued implementation of social distance measures and health protocols will continue to condition private consumption and investment. Also, the global nature of this shock implies a weak performance of our exports.
The Bank analyzes that economic growth is expected to be supported by fiscal and monetary stimulus provided, by reducing uncertainty, by rebuilding earthquake-damaged buildings, and from the resumption of global economic activity.
The Albanian economy shrank in the first months of the year, hit by the earthquake in late 2019 and the spread of the pandemic in March. After falling 0.1% at the end of last year, gross domestic product fell by 2.5% in the first quarter of 2020.
The Bank analyzes that the economic downturn was mainly driven by the contraction of construction activity and investment. Labor market indicators for the first quarter only partially reflected the impact of Covid-19, as measures to limit the spread of the pandemic affected less than a third of the quarter.
The unemployment rate rose slightly from 11.2% at the end of last year, to 11.4% in the first quarter. The available economic indicators during March and April have marked an unprecedented decline, illustrating the negative effects of this crisis on our economy.