OP-ED/The true picture of the Albanian economy

OP-ED/The true picture of the Albanian economy

This article has been written for Albanian Free Press newspaper and www.albanianfreepress.al

Construction of high towers and apartment blocs, tax relieves for luxury hotels and gambling businesses, unsolicited concession offers. These are the main novelties of the Albanian economy, which, according to the government and analysts, are causing a big damage to the economy.

Unemployment, poverty, salaries, inequality, investments, productivity, public debt and exports; these are the main indicators which are used to measure the economy.

This is the true picture of the Albanian economy at the present:
Unemployment is hard to be calculated due to the formalization of the economy and growing migration. Today, it’s estimated to be at 12,5%, if we also take into account the two factors mentioned above.
Disparity, according to the World Economic Forum has grown by 7.7% in the past five years. Average daily incomes per capita have also fallen by 0.1%.
Poverty, according to the World Economic Forum has grown by 0,7%. Poverty rate here is 6,8%. According to the World Bank, Albania is the country with the highest poverty in the region, where one third of the population lives on less than 5 USD a day. Poverty is measured with incomes per capita and the ability to meet basic needs. Incomes per capita for Albanians are the lowest in Europe, accounting for 29% of the EU average.
Albanian exports, according to the Intelligence Unit at the Economist are the lowest in Europe along with exports of Kosovo. Montenegro has the highest exports per capita in the region with 3,022 USD in 2017, followed by Serbia with 2,944 USD and Macedonia with 2900 USD. In Albania, exports per capita in 2017 were 1,773, only managing to exceed Kosovo with 780 USD.

Minimum wage. According to the latest figures supplied by Eurostat for the EU member countries and candidate countries, despite the fact that last year, from 22 thousand lek a month, minimum salary in Albania went up to 24 thousand lek a month, the country continues to have the lowest salaries in the continent. With a minimum salary of 180 euros a month, Albania is last on the list.

Let us continue: Organization for Economic Cooperation and Development has published its latest report on competition in Southeast Europe for 2018. As far as investments are concerned, OECD has made an evaluation of two main components. The first component relates to investment policies. In this component, Albania has scored 3.5 points, the same as Bosnia and less than Kosovo, Macedonia, Montenegro and Serbia which have scored 4 points. Alternative solution of disputes is another indicator where Albania is at the bottom of the list, leaving behind only Bosnia and Herzegovina. As far as investment incentives are concerned, Albania is on the same position as Bosnia and Herzegovina and Kosovo with 2 points, while the other countries of the Balkans have a much higher score.
As far as public investments as percentage of Gross Domestic Product are concerned, we can compare 2018 figures with 1993 figures. At that time, when the situation was really critical, public investments as percentage of GDP were 7,3%, while today, they stand at 5%. Although the government brags that they are the highest in the recent years, they’re still low to be able to sustain economic growth.

To make the future of Albanians “brighter”, the government comes up with PPPs. At the essence of this philosophy is the funding of public projects with money coming from the private sector, which would be paid gradually in time.

This strategy is no different from the increase of public debt, with the only exception that these contracts are not officially considered as debt. But they are debts and these debts will be paid by generations to come. These funds are used in projects which yield no added value in the economy. PPPs in Albania are proving to be schemes which promote abuses and corruption, because they are not transparent.

Economic growth. According to the World Bank and IMF, in order for economic growth to have an effect on living standards, it should be higher than 6%. In its periodical report, the World Bank predicts a 3.5% annual economic growth for Albania. The prediction made by international institutions is much more conservative than the government’s predictions of 4.2% economic growth for 2018 or 4.3% and 4.4% for the next two years.
Note: The views expressed in this article are the author’s own and do not necessarily reflect Albanian Free Press’ editorial policy