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Our Bad Luck Is Good!

Updated on April 14, 2020
Eduart Gjokutaj profile image

Eduart has many years of experience as an analyst and expert for financial, fiscal and economic issues in Albania and Western Balkans.

The return to normalcy by the end of April and the beginning of May is likely to become a reality, although the security distances implemented this month are expected to be a social innovation. Probably all the services open to the public will continue this way all summer and autumn together. But, work from indoor environments, like home will start to look quite fashionable and maybe and work will have more flexible schedules than to date.

Solidarity with patients and healthcare workers is ethical. Solidarity should similarly target our fragile economy, except the health situation.

In the long run, the businesses will have to operate in a new environment, where the crisis and the reaction to it will accelerate the need for (a) an immediate adoption of new technologies, (b) an inevitable pull towards supply chain unlike before, as well as (c) a new growth of oligopoly stimulating policy, rather than monopolistic tendencies

— Gjokutaj, E

The current corona-virus epidemic is highlighting the weaknesses and vulnerabilities of our health, economic and political system. Amidst all this chaotic situation with the object of human life, it is surprising to understand that political debates have overshadowed aspects of the risk and uncertainty of public decision-making, as well as the weaknesses of the system itself.

A broad freeze of the economy on this scale, which is damaging the economy's immunity and people's incomes, is new experience for government and politicians. A continuation of our isolation inside the houses will undoubtedly create liquidity problems. However, in the conditions of the Albanian economy, which is based on 46 percent of its services, the violation of the effect of self-isolation from pandemics is more direct. The continued closure of the economy could dictate bankruptcy, unemployment, and the urgent need for credit. At this point it should not be allowed to happen as this situation even if it does not resemble the crisis will create major problems that have not been experienced before.

If we refer to other countries, to see how they can cope with the same calamity, it is seen that countries will have experiences in different ways as it all depends on the structural resistance of economies to withstand such shocks, as well as the ability of the health system and decision-making of politicians to respond in new ways to this unprecedented challenge.

The government and politicians will need to inspire public confidence to facilitate recovery. Building trust will require a delicate balance between strong leadership and humility in front of people, acknowledging that they are learning as we progress toward fighting the virus.

Physicians and experts with an impact on the public by appearing modestly with their knowledge in the conventional and social media can contribute to the re-creation of such a trust. Analysts and their ilk should start a long social quarantine and if not implemented by them should be unequivocally penalized by social isolation and social disgust.

Today, solidarity with patients and healthcare workers is both ethical and logical.

But solidarity should similarly target our fragile economy.

This time that is being extended further is reducing the financial resources of the state budget, but also of the private sector requires a reaction. Currently, there is an American reaction model, where for every employee who does not work, he is directly given a check with money to cover the expenses and the European reaction model, where the aid is in the form of business lending and a category more affected by economic styling. The American style is easy to implement, but also difficult for the "stomach" of the country, as well as unfair. Above all this approach cannot help stimulate an economy in terms of closure.

Although we mention the models, they cannot be used a priori directly, as we see in the Albanian economy and market.

The Albanian economy does not receive much attention in relation to the global economy, mainly because it is small and little integrated with the world economy. The good thing about this is that stopping work for a short time does not spoil the work of the foreign market circulation chain, as Albanians are not such important contractors as to influence the blocking of the supply chain of world production. But even if there are some of them, they are not a problem that cannot be recovered. This is the position of the Albanian economy in the global market.

Given these circumstances during the global financial crisis of over 10 years ago, but also in the future, the economy remained almost unaffected by external effects, as it was mainly supported by foreign aid, remittances, but also the informality that nurtured among them others also the formal economy by consuming goods and services. This economic model continued to flow uninterruptedly. Even in the post-global crisis period, fluctuations and shocks in global oil and mineral markets did not significantly affect the country's economy.

However, the case of COVID-19 is different and is the avalanche that suddenly started to hit the global economy, which modestly includes the Albanian economy. The unprecedented Covid-19 shock has already created stress in capital markets in developed countries, prompting a strong backlash from central banks. The same thing has happened in Albania, despite the fact that there are different characteristics of these markets.

Our bad luck, that we do not have capital market for this case is good. Although there is currently a loss of purchasing power, the crisis dictated by pandemics will be limited to a liquidity crisis, avoiding serious bankruptcy problems and declining stock exchanges as in developed countries.

Small businesses, which are limited in their activity, as well as tighter for borrowing are highly dependent on budget support and other ancillary funds along with mitigation measures and time-delayed payments. Their survival after 1 month of closure is introduced into the danger zone. Shopkeepers, craftsmen, restaurants and hotels, the entertainment industry and many others do not have more than 1-3 months of financial reserves. Most businesses have enough inventory and money to survive for three to six months. If liquidity problems persist and real economy problems lead to further downturns, capital needs may arise. Banks will also face liquidity problems in the near future if services continue to be closed.

However, the hope of revival exists, because whenever entrepreneurs find themselves in trouble, they also find ways to adapt and return to the market. Although, the shock of blocking commercial activity is much more severe than in previous blockades, the exit route, although uncertain, will again find consumers, at a pace of resumption and with new and complex protection protocols. of health.

The return to normalcy by the end of April and the beginning of May is likely to become a reality, although the security distances implemented this month are expected to be a social innovation. Probably all the services open to the public will continue this way all summer and autumn together. But, work from indoor environments, like home will start to look quite fashionable and maybe and work will have more flexible schedules than to date.

In the long run, the surviving businesses will have to operate in a new environment, where the crisis and the reaction to it will accelerate the need for (a) an immediate adoption of new technologies, (b) an inevitable pull towards supply chain unlike before, as well as (c) a new growth of oligopoly stimulating policy, rather than monopolistic tendencies.

Under these conditions, on the one hand, the majority companies must start giving something to the minority businesses. Minorities need to give something less to their regular customers. And so, giving everyone according to the role they have in this chain can get out of this situation with less loss.

Meanwhile, the public administration needs to recover its flaws and work at full capacity, albeit at home.

One of the first steps to be proposed and discussed is the bad debts between businesses, which have been a problem for many years. They need to be redesigned by designing several scenarios, as a single one is not enough to solve the stalemate. For example, the time has come for the extinction formulas according to the schemes previously proven of some debts on behalf of the economy tomorrow.

On the other hand, state institutions that have direct links with businesses should expose the problems posed by this situation and all together be coordinated by the persons in charge of the government to clean, address and extend in time all the specific situations arising from this all-encompassing temporary closure.

Now this crisis must shake well all that has not gone according to the law. This time of unprecedented stress is the same as the test of resistance (test stress). It is no longer necessary to start a tedious process of correcting defects. The administration and businesses need to start a special dialogue to clarify once and for all what the obligations and rights to each other really are, including the fiscal amnesty. This period of pandemic at the end of it must find us more organized than in the moments when it appeared.

To activate solidarity between each other, among Albanians, but not only between us can be the key to a new socio-economic environment, why not a visionary approach or return to the former social relations.

Life is priceless.

We may not be ready yet to accept a higher price for a health service that exceeds economic opportunities even though we may be willing to consume less in exchange for a safer world.

But the time has come to discuss dedicated health packages that serve health, precisely for illnesses and disasters that occur suddenly.

We must not dismiss these thoughts dictated by pandemics.

This does not prevent us from rethinking our resource allocation between ordinary consumer goods on the one hand and health and education on the other. And perhaps reconsidering the goals of life protection will make us realize that acting on changing approach is everyone’s responsibility.

We need to move beyond short-term thinking, both for our own benefit and for future generations. Such a calculation would be a giant step towards the regeneration of a raw world by Covid-19.

To activate solidarity between each other, among Albanians, but not only between us can be the key to a new socio-economic environment, why not a visionary approach or return to the former social relations.

This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.

© 2020 Eduart Gjokutaj

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