The World Bank foresees an economic recession in the Western Balkans as a result of the coronavirus pandemic.
The World Bank’s latest Regular Economic Report (RER) predicts a negative regional growth between -3% and -5.6%. With the high uncertainty brought about by the pandemic, the report uses a baseline scenario, that assumes preventative restrictions will be lifted by the end of June and the economy will begin to recover in the second half of the year, as well as a downside scenario, that assumes restrictions will be lifted by late August, with economic recovery beginning only in the final quarter of 2020.
The report forecasts a drop in domestic and foreign demand, while limited liquidity and an atmosphere of uncertainty leads to a drop in investment. Social distancing measures and travel restrictions will have a large impact in tourism, which accounts for 50% of employment in the region. The aftershocks of this negative impact on tourism are likely to be felt in the long-term, with changes in consumer behavior being liable to change following the pandemic. Albania, Kosovo, and Montenegro will be especially vulnerable in this aspect, due to their economies’ significant reliance on tourism.
While Western Balkans governments have rolled out fiscal and social relief measures, a large part of the population in the region relies on self-employment, part-time jobs, and informal employment. These groups are difficult to support through conventional measures. Thus, extended financial support, designed to regional demographic specifics, may be necessary to aid these vulnerable groups. However, policymakers must walk a thin line between mitigating current impact and preparing for economic recovery.
Albania emerges as particularly vulnerable to economic recession in the heat-map drafted by the report. This comes mainly as a result of high rates of self-employment (34.7% of total employment) and informal employment (61% of total employment), as well as the large part the tourism industry takes up in its economy (48.2% of exports). The Albanian government has yet to provide a concrete financial relief plan for informal workers. Meanwhile, both its first and second financial relief packages have failed to comprehensively address the needs of tourism workers.