One crisis now and another longer one yet to come

Tirana Times
By Tirana Times March 13, 2020 12:55

One crisis now and another longer one yet to come

It is natural and expectable to be engulfed in the rushed, almost panicky mood of the moment, trying to do the best to restrain the epidemic of the Covid-19. Of course containment measures are of paramount importance and a close monitoring of the situation is indispensable. The government seems to be doing a decent job, within its many existing limitations, at least as per commendation of World Health Organization officials who have welcomed the radical and swift decisions taken to limit social interactions.

However critics also rightly point out that the government should have imposed travel bans for northern Italy much earlier as well as prepare quarantine sites well in advance, before the illness showed up within Albanian borders.

In addition to the current crisis, in the horizon of this fast-developing situation another darkness looms large: the coming economic and social problems that are bound to arise due to the impact of the virus in the nation and worldwide. First and foremost the Albanian economy is already vulnerable: a business climate with challenges that have impeded FDI, a languishing competitiveness given the penetration of monopolies and concessions as well as sectors and segments of the population hard hit by the earthquake consequences. 

The suspension and limitation of economic activity imposed to safeguard the public health is going to produce at least a short term shock on the business revenues. The impact on tourism will be detrimental.  Tourism association officials have already spoken to the media about the large scale cancellations on top of other cancellations that happened right after the earthquake. Transport industry and most of the service categories face the same fate.

For the moment although the stakeholders are aware of this situation, it is unclear what the real capacities of the Albanian public finances are to weather this storm. Short term fixes are a bit easier. For example the suspension of mortgages for three months was already announced by the Central Bank for both business and individuals. This is more than necessary since most likely households and small enterprises will suffer downward spikes in their revenues and will not be able to meet their existing obligations to the banking sector. 

However the big picture is still loading. The overall effect on the economy is yet to be understood and come to terms with. 

As the stock market and oil prices spiral down around the world, talk of an upcoming recession, much in the like of the 2008 one, is already being heard in all major global media. The last time around Albania suffered partial consequences given its extremely limited exposure in the financial markets. However this time things are different. No bailout strategies will work against a microscopic destructive force that is wreaking havoc.  

Albania does not possess even a fraction of the vitality and the resilience of the Italian economy. Nor can it count the relief options that come with being part of the European Union.  Some tough decision will have to be made within the limitations of the state budget and the framework for keeping public debt under control. Therefore a serious, expertise based debate untinged by hysteria and polarization is necessary to compare options and strategies and brainstorm creative ideas of mitigating the negative impact on our economic performance and social impact on the population. 

The debate should be open and constructive and inclusive in terms of stakeholders. That means getting on board the government, opposition, business councils and employers, academics and financial institutions that monitor our indicators. 

Health experts believe that the virus crisis will reach a peak and then subside. The experience witnessed in China seems to back this hypothesis. The government is now liable to closely follow its measures and secure their implementation as we as to empower the health sector with any means possible in order to offer assistance to the citizens and their families and ultimately to save human lives. 

However we should not forget that a much larger crisis in the long term is already within our glance in terms of economic disruption and decline. We need to get seriously prepared about that too. 

Tirana Times
By Tirana Times March 13, 2020 12:55