The Albanian Minister of Finance, Ridvan Bode, shared some of his ideas about Albania’s economic situation and the latest economic developments in the world during an interview with the Albanian daily, Shqip.
World economic crisis
Bode admitted the world is facing a deep crisis that is affecting every country and many of the branches of international economies. The crisis has three elements. The first element is the increase in the prices of energy, which is conditioned by specific economic policies of particular countries and the decisions of some international organisations about oil and its price. The second element is the increase of food prices. The increase of food prices is a consequence of the increase of the prices of corn, rice, vegetable oil, and other staple products. The increase of food prices is caused by a number of factors. First, a number of countries facing increasing oil prices are tying to increase their production of bio fuels. Second, a number of governments have changed their agriculture policy and ended the subsidizing of agricultural products. Third, large food producing countries such as Russia, Argentina, and large rice producing countries are trying to exploit the situation. They have imposed export taxes on food exports trying to increase their revenues and consequently their investments. The third element is the mortgage crisis in the USA, caused by massive losses in the subprime house loans. The crisis has the potential to turn into a banking crisis, although the US government is vigorously intervening to prevent that. Bode declared that he hopes that this is going to be a short crisis because a number of developing countries have their own growth potential and they are trying to adapt to the world crisis in order to protect their own economies. Also, the Albanian Minister of Finances believes that the capacities to manage such a crisis are enormous.
Albania- only slightly
influenced by the world crisis
Bode declared that as a small economy, Albania cannot influence development in the world economy. Simultaneously, for a number of reasons, Albania is going to only be slightly influenced by the world crisis. Therefore, while other countries in the region are experiencing high inflation, such as Bulgaria at 14 percent, Rumania at 9 percent, and others, Albania had an increase, according to the Consumer Price Index, of only 4.6 percent. At the same time, Bode listed a number of factors that explain why Albania is going to experience significant problems because of the world economic crisis. First, Albania is experiencing a steady growth. While the economic growth in the European Union was only one percent, the economic growth of Albania was at least 6.5 percent. The Albanian government had planned a 6 percent growth for the last year. It was believed that the agriculture sector was going to have a negative result because of the long drought. However, the latest data is showing that the Albanian agriculture sector grew around two percent last year in spite of the long drought. Second, Bode expressed his belief that the Albanian agriculture sector has the capacity to increase its production. The increase of food prices and the prospect of increased returns are going to encourage farmers to increase their food production.
No tax cuts!
The Albanian Minister of Finance declared that the Albanian government is going to take every measure in order to prevent the decline of purchasing power of Albanians. Bode rejected that cutting taxes, such as removing or reducing the VAT for specific products, is the right way to preserve the purchasing power of Albanians. After all, Albania has the lowest taxes in Europe, and is considered one of the five countries with the lowest tax rate in the world. Therefore, inflation was not caused by the tax rate in Albania, but the latest developments in the world economy. The reduction of taxes was not going to overcome inflationary pressures from abroad.
Wages to be increased in July
The Albanian government is not going to attempt to reduce inflation, but it is going to use its resources to control the negative effects of inflation through a careful increase in wages and pensions. Bode admitted that the Albanian government debated last week about a proposal by the Minister of Labour, Social Affairs and Equal Opportunities, to increase immediately wages and pensions by three percent. However, the Albanian government decided to increase wages and pensions in July, as it is done every year. During this period, the government is going to monitor the situation and measure inflation very carefully. Bode expressed confidence that the wage increase in July is going to compensate the inflation and guarantee a progressive increase of low wages and pensions at the same time.
