The Albanian economy will see a 5% drop, which will lead to poverty rates similar to those seen in the beginning of the decade, the World Bank reports.
In a forecast concerning the economic and social impact of COVID-19 in the Western Balkans published last week, the World Bank has outlined two possible scenarios. In the most optimistic one, the outbreak and the associated containment measures last until the end of June, whereas in the other, they last through August.
The World Bank has made predictions on the impact the crisis will have on the country’s employment and, consequently, poverty, according to each scenario.
In fact, the Albanian economy seems to be reopening even earlier than the World Bank’s more optimistic scenario assumes, which means that its forecast may be more negative than the expected reality.
The more optimistic scenario foresees poverty in Albania rising by 4%, reaching 40%, whereas in the less optimistic scenario, poverty will rise by 8%, with 44% of the population falling below the poverty line. In the first scenario, poverty in Albania is expected to reach 2012 levels, whereas in the second it will reach 2005 levels.
The World Bank defines the poverty threshold as “$5.50 (2011 PPP) per person per day for all countries except for Bosnia and Herzegovina, where poverty is based on KM 205 per month threshold.”
The Albanian economy reopened on June 1, with almost all coronavirus preventative restrictions being lifted, thus it can be assumed that poverty will increase by less than 4%, and will remain at less than 40% overall.
The report stresses that Albania and Kosovo will likely face more difficulties than other countries in the region, seeing as a third of the people who work in the sectors affected by the coronavirus crisis in these countries are self-employed and especially vulnerable to a loss of income.
The World Bank divides the economy in three main groups (highly impacted, moderately impacted, and relatively impacted), based on the expected impact the crisis will have on them. It notes that, in the worst-case scenario, the highly impacted workers will lose up to 25% of their income, the moderately impacted group will lose up to 12.5% of their income, whereas the relatively impacted group will see no significant loss in income.
In the best-case scenario, which entails an early reopening of the economy as in Albania’s case, the drop in average income is expected to be 12.5% and 6.3% for highly impacted and moderately impacted sectors, respectively.
Specifically, the World Bank notes that, in Albania, “many industries, among them textiles, mining, call centers, and construction, have been forced to reduce production to comply with social distancing requirements and because demand has dropped as export orders collapse.
Albanian emigrants are also likely to suffer from this global crisis, which reduces their incomes and thus remittances.
Since most of the people working in agriculture are already poor, and the simulation assumes no income decrease in agriculture, the increase in poverty is mainly the result of urban people in services losing a significant share of their earnings.”