In an interview with the well-known magazine for the business world in Central Europe, Business Link, Balfin Group President Samir Mane spoke about how Albania and the region are facing the COVID-19 crisis, making a prediction of the economic consequences.
Business Link is a magazine published by one of the most influential business organizations in Austria, the Business Development Network in Southeast Europe - "SEEBDN". Founded in Vienna, SEEBDN was established as an independent business association that has played an important role in linking German and Austrian businesses with Southeast European countries. SEEBDN includes the following countries: Austria, Germany, Slovenia, Croatia, Hungary and the Western Balkans.The interview:
BL: If we draw a parallel to the global economic crisis that hit the world in 2008, will a new crisis have more devastating consequences?
SM: There are several challenges that we face today due to COVID-19 outbreak crisis that are similar to the ones in 2008. The first important issue relates to uncertainty, as there are many questions that no one can answer to a certain degree with confidence. We don’t know how long the crisis will last or if there will be a second wave. For these reasons many businesses around the world have factored the uncertainty as an important factor influencing their decisions. While the 2008 crisis hit integrated financial markets the hardest, I believe that the devastating wave to the real economy was short run. After the crisis, most of the service and manufacturing industries managed to survive while mostly financial institutions had to recompose and think differently in terms of risk and expansion. The impact on the real economy of the South Eastern European countries was more moderate than what is estimated that will happen during 2020. The COVID-19 outbreak crisis has a larger geography and has affected almost the entire global economy, all industries and all business operations. The fragile economies in South East Europe, depending on the international markets, are seriously affected. To leave the COVID-19 crisis behind, many businesses would have to readjust to these external pressures and maybe innovate to a completely new business environment. If business will not adapt in time, consequences may be more devastating than those of the 2008 crisis.
BL: What is your estimation, how long will it take for your country to return to the level where it was at the end of 2019, especially if the world slides into recession?
SM: I believe that Albania will manage to achieve positive growth levels next year. This is also supported by many international organizations that estimate a quick recovery in 2021. The structure of the Albanian economy is mostly reliant on domestic consumption and has relatively little ties to the global supply chain and global trade. For this reason, I believe that with the accurate government response and increased confidence from consumers it will result in positive economic growth. Tourism is becoming an important industry and most likely domestic demand as well as tourists from neighbouring countries will help overcome the many uncertainties facing the industry this season. However, as the uncertainties are mostly related to the public health issues I hope that the government’s measures will be appropriate to keep in balance the health of the economy and public health at the same time. These are unprecedented times that are affecting negatively the global economy simultaneously. Albania and other countries in the region will reach the 2019 levels relatively quickly by the middle of next year.
BL: Which approach is best for SEE, especially for Western Balkans candidate countries (Montenegro, Northern Macedonia, Albania, Serbia)? Do they need to ask the EU for help?
SM: I believe in the EU project and that all countries should integrate and join the EU in the near future. This is a positive political and economic step, which would lead to greater stability, better governance and better business opportunities for businesses operating in the region. The EU has assisted the countries of the region with a bilateral financial assistance during the coronavirus emergency. This is a positive commitment that signals a longterm relationship between the EU and the Balkans and brings confidence to many businesses. Despite this, most SEE countries could do more to further integrate their economies with each other. Rules and regulations could be better harmonised and at the same time some of fiscal policies should not differ from one state to the other. These policies could be achieved without EU integration. SEE countries are in general less competitive than the EU, and integration process should pay attention to issues relating to good governance, workers training, increased competitiveness, research, and development.
BL: How can financial sector be supported in order to be able to lend to a weak economy later?
SM: Overall, the financial sector has been well prepared to deal with these extreme shocks to the economy. Unlike the 2008 crisis, banks are in a safer position and should try to build a strong relationship with their customers by understanding their difficulties and providing expertise to overcome these challenges.
Of course, for some businesses the crisis may have exposed some of the problems that may have been inherited before the pandemic, and some may go bankrupt. Many other businesses that have had a strong performance in the past will need banks to overcome these difficulties together.
At the same time, not all countries will be affected equally. In Albania, many banks are well capitalized and so far, have adapted well to the challenges and met the requirements of customers. The Central Bank in cooperation with the Government is also playing an important role.
BL: What are your country’s plans for the next year?
SM: Albania is well integrated with the rest of the Western Balkans, and all of these countries expect to integrate into an even larger family, the European Union. This has been a year heavily influenced by the pandemic, but the Western Balkans governments' goal of accelerating membership in the European Union has not changed. Cooperation and joint projects between these countries are also increasing. Meanwhile, the entire region of the Western Balkans is increasingly seen as a single market, offering more opportunities for both foreign investors and local businesses from these countries. All the countries of the Western Balkans are trying to overcome this difficult moment that was created by the pandemic, they are increasing the economic interaction between them, hoping that these efforts will be appreciated by the European Union..