Albania: The Case for Strengthening the Financial Resilience of Micro, Small and Medium Enterprises Against Disaster and Pandemic Shocks
In 2019, a devastating earthquake struck Albania. It was estimated to be a 1-in-100 year event, causing significant damages and losses to the country. Just a few months later, the COVID-19 pandemic swept through the country.
It presented immense difficulties for the Albanian economy which was still trying to recover from the earthquake. As the consequences from these events unfolded, many Albania businesses, particularly micro, small and medium enterprises (MSMEs) had to close or suspend their operations.
MSMEs play an important role in the Albanian economy. They constitute more than 99 percent of firms and generate more than 85 percent of formal employment in the private sector. They also represent a fair share of state tax revenues and are important sources of innovation. Further, they account for at least 97.5 percent of female-managed firms. However, small businesses are more vulnerable to external shocks, including disasters and pandemics.
Like other governments around the world, the Government of Albania (GoA) has introduced a number of interventions to support firms that suffered revenue losses and damaged assets from these dual shocks. The GoA increased spending, introduced tax deferrals, exemptions, wage subsidies, and launched two credit guarantee windows through commercial banks. These measures helped to ease salary payments and release financing for working capital and investment needs. Public spending rose to 33.2 percent of the country’s gross domestic product (GDP). However, these measures resulted in massive fiscal costs, which have put a significant strain on the government’s budget.
Photo Credit: Genti Shkullaku/ The World Bank
Financial Resilience Around the World | Blog Series
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- Back to the Future: Climate Change Resilience, Self-Insurance, and Market Insurance
- Sovereign Catastrophe Risk Pools – 15 Years on and Still More to Come
- Disaster Risk Finance in Africa: Lessons Learned From Pioneering Disaster Risk Finance Solutions Over the Past Decade