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FinMin: Three possible scenarios for mitigating coronavirus effects

The Finance Ministry has designed three basic scenarios for mitigating the economic effects of the coronavirus - favorable, unfavorable, and least favorable. The biggest economic blow is expected in the second quarter of 2020, Finance Minister Nina Angelovska said at a press conference Wednesday. 

Skopje, 1 April 2020 (MIA) – The Finance Ministry has designed three basic scenarios for mitigating the economic effects of the coronavirus – favorable, unfavorable, and least favorable. The biggest economic blow is expected in the second quarter of 2020, Finance Minister Nina Angelovska said at a press conference Wednesday.

“It’s hard for economic analysts and international financial institutions to make predictions, due to the type of crisis. That’s why we constantly revise scenarios and design multiple versions. We have developed three basic scenarios: favorable, unfavorable, and least favorable. In the first one, we envision a 20% drop of the budget revenue. That would mean EUR 700 million lower revenue, or EUR 700 bigger deficit,” Angelovska said.

In the second scenario, the minister underlined, the budget revenue drops 30% and accounts for EUR 1 billion deficit, while in the third it drops 40%, running up EUR 1.3 billion deficit.

“All scenarios project the greatest revenue decrease, 40-65% compared to 2019, to happen in the second quarter, while scenarios for Q3 and Q4 differ depending on when the economy stats healing. It’s important we’re prepared for the worst and do all we can to bring about the best,” Angelovska said.

Constant monitoring, agility, and flexibility of the governments, are key elements for dealing with this shock to the healthcare and economic systems.

“We’re working on securing funds for each of the three scenarios. Unpredictability and capital market sensitivity pose a challenge in designing scenarios. We’re in the process of securing funds thought the International Monetary Fund, the World Bank, etc. EUR 600 million, enough to fund expenditures, economic measures, and additional healthcare system needs, are expected to be secured in the course of the month. It all depends on which scenario will play out,” Angelovska said.

Money requests, she added, have been made to replace Eurobond funds.

“We’ve sent requests for EUR 400 million from the International Monetary Fund and EUR 200 million from the World Bank, adding up to a package of EUR 600 million. An EUR 500 million Eurobond was supposed to be issued in Q4. Now, instead of these EUR 500 million, we’re trying to secure EUR 600 million in advance, but that doesn’t mean that all the money will be spent, it depends on how much the expenditures will increase,” Angelovska said.

The budget, she added, was in great shape at the start of the year.

Implementing preventive coronavirus measures and putting public health above else, the minister said, has decreased economic activity, which has started to reflect on the budget.

“Starting March 20, when we started to feel the effects of the coronavirus preventive measures, we saw a rapid decrease of tax revenue of about 25% per day. Tax revenue has dropped 11% in March 2020, compared to the same period in 2019. This is due to the decrease of 17% decrease in VAT revenue, 11% in excise revenue, 11% in income tax revenue and early advance payments from socially companies,” Angelovska said.

The projected 2020 revenue before the crisis was EUR 3.6 billion, while expenditures amounted to EUR 3.9 billion.

“Projected deficit for 2020 was EUR 283 million. How much deficit will increase depends on how much revenue will decrease. Despite increased needs of healthcare system and economic measures that aim to soften the blow on the economy, all scenarios project that expenditures don’t go above EUR 3.9 billion. However, the structure of the expenditure budget will change drastically to fit the needs of the healthcare system and economic measures aimed to mitigate coronavirus impact,” Angelovska said.

She added that changes and cuts of unproductive expenditures will be discussed at Wednesday’s session of the government.

“How we’ll overcome the coronacrisis depends on all of us. If we act responsibly, the health crisis will soon be over and economic activities will resume. The two sets of economic measures aim to soften the economic blow, protect jobs, maintain social stability. As the situation progresses, we’ll adopt new measures to soften as much as we can the coronacrisis blow on the economy and the population,” Angelovska said.

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