Albanian economy to shrink by 5% due to virus, quake -World Bank

Albania's economy, hit by an earthquake that left 17,000 homeless last year and coronavirus-containment measures, could shrink by as much as 5% in 2020, even if most economic activities restart in early summer, the World Bank said.

In its semi-annual report on the Western Balkans released on Wednesday, the bank described the double hit to Albania as "destructive", noting the new coronavirus had frozen large parts of the economy. The bank said dependence on tourism, close ties with hard-hit Italy across the Adriatic Sea and limited fiscal options made Albania especially vulnerable right now.

"Even according to the baseline scenario, which assumes most economic activities could re-start by the beginning of summer, the annual gross domestic product is expected to shrink by 5% in the year 2020," the World Bank said. However, the bank said its forecast had an unusually high degree of uncertainty. The downside scenario, which assumed economic activity would start later in the summer, saw the economy shrink by 6.9%.

The recession and measures to prop up the economy would widen the budget deficit to 5.4% of gross domestic product in 2020 and increase public debt to 75.8% of GDP, it added. Albania's last assessment at the end of March saw economic growth slowing to 2% from 4.1%, the budget deficit rising to 3.9% from 2.2% and public debt rising four percentage points to 68.8% of gross domestic product.

Once the crisis was over, "the normalisation of economic activity and the reconstruction to soothe the consequences of the quake are expected to back rapid growth, but structural reforms are needed in the medium term," the bank added.