Assessment of Firms'Financial Resilience against Pandemic and Disaster Shocks in Albania

The objectives of the assessment are twofold. First, it aims to model the impact of exogenous shocks to revenue and physical assets on firms’ profitability, liquidity, capital structure, and debt vulnerability; based on these findings, it seeks to understand vulnerabilities to employment and government revenues. Second, it quantifies the demand for funding to support viable firms from falling into bankruptcy due to liquidity shortfalls.

The exercise can inform governments’ financial planning by (i) quantifying the funding demand to address liquidity shortfall; and (ii) estimating the (up-front) cost of different fiscal/financial support packages. The stress test exercise is based on financial filings at the National Business Center by a large sample (about 10,000) of formal firms in 2019. Using the country’s disaster profile and the COVID-19 shock experience as an illustration of potential future shocks, it quantifies overall changes in firms’ financial health due to drops in revenue and asset damages. The exercise also identifies the characteristics of the most severely affected firms, including size, age, manager’s gender, sector, and geographical location.

Relevant blog: Assessment of Firms' Financial Resilience against Pandemic and Disaster Shocks in Albania