World Bank assessment on potential social and economic impact of Covid-19

Press statement by the Minister of State for Reconstruction, also national coordinator for the National Recovery Plan, Arben Ahmetaj:

The World Bank has most recently announced and unveiled a series of sectoral reports on the potential damages and humanitarian and global impact of the Covid–19 pandemic. The Bank has mainly focused on the damages, the effects on sectors of the economy, as well as on the potential surge in poverty in the region.

Before we move on the concrete figures and their statistical interpretation, this report is not an outlook on the traditional economic situation of the Western Balkan countries, including Albania, but only a photograph of the potential effects and temporary damages to the economy due to the Covid-19.

Any political or non-political stakeholder seeing it differently is either a non-professional one, or he does so intentionally to misinform. What did the report say? The report refers to the pre-crisis situation in the Western Balkans and highlights that employment in the Western Balkans rose by 45.6 % for age-group over 15 in 2019. What the report noted about Albania? Over the past two years, the minimum wage was increased by 18%, reaching the region’s average by over 12%.

What else did the report say? The unemployment rate in the Western Balkans has fallen to historic lows. Albania’s unemployment rate fell to its lowest at 11.5%. But what does the World Bank warn? I emphasize, this is a warning issued for a reason, because any warning is sent to the governments in the region to take the necessary measures through reforms, whether in the social sector or in other sectors to prevent a potential fresh plunge into poverty like in 2012. 

What does the World Bank report specifically note? According to the simulations performed for this note, it is estimated that the poverty rate in Albania may rise, going up to about 40% in the baseline scenario. In the worst-case scenario, the poverty rate could go up to 44 percent and the World Bank refers to the 2012 rate. So, according to the baseline scenario, the World Bank says, the poverty could go back to the 2012 rate, the deepest valley of poverty in the country and I would like to remind citizens that, despite the current difficult situation, the difference between 2012 and today is that there was no crisis back then, but bad management by the then government that plunged the country into the deepest poverty after ’96 -’97.

We of course are alerted, we are prepared and, in the meantime, we will unveil our new economic recovery and growth plan very soon. As I already pointed out, the difference lies between the year 2012 and 2020, when our economy sustained two severe shocks, namely the devastating earthquake in end of 2019 and the global shock that hit not only Albania, but whole region and the globe, from the world’s most powerful nation, the United States of America that today records 40 million unemployment applications and payments to a country with a fragile economy like Albania or the entire region, where, however, the government has been able to intervene through two important support packages, which have ultimately met the goal they were launched for, maintain the income level for the worst-hit business categories due to Covid-19, ranging from the garment and footwear industry, call centres, services sector and entire small business.

Everybody knows we provided a minimum wage and a bonus of 400,000 lek to all small business workers under the government’s first and second support package. The first and second support package combined helped small business and we also abolished income tax on all businesses with an annual turnover of 14 million Lek and postponed tax payment for other businesses until autumn and until end of this year for certain business categories.

I will provide some figures to show how the support packages have worked. As many as 64, 919 small business workers and self-employees have benefited the “wartime” payment under the first support package. All these individuals have received their first and second payment and they will benefit a third tranche very soon. a total of 111, 898 people working in some 34, 850 private businesses have already received the “wartime” payment of 40,000 Lek under a state budget fund of 4.5 billion Lek and a total of 179, 000 workers will benefit such payment until end of this process by mid-June.

Some 628 applications have been filed for loans under the sovereign guarantee fund to help the coronavirus-affected businesses pay their employees and some $40 million have been already disbursed to the businesses to date.

In the meantime, the second sovereign guarantee fund has just been launched and dozens of applications have been already lodged with 12 commercial banks. Before I conclude, I want to emphasize that our efforts and economic plan will make sure that the country not only it doesn’t go back to the 2012 rate, the deepest valley of poverty, but thanks to reforms, public investment and successful financial and economic policies we will make sure that Albania reaches the pre-crisis growth rate in the next two or three years and not after five years as the international institutions project.

Thank you!