Tirana Times
TIRANA, Oct. 12 – Economy experts are divided on whether Albania needs a new economic growth strategy following a central bank initiative to adopt a new model aimed at bringing higher growth rates in the aftermath of the global economic crisis.
Gjergj Filipi, a research director at the Tirana-based AGENDA Institute, said in a recent interview with Deutsche Welle in the local Albanian service, he was sceptical of the Bank of Albania initiative.
According to him, Albania does not need long-term strategies at this moment, suggesting concrete short-term and easily achievable goals.
“Being part of the Stabilization and Association Agreement (SAA), many aspects are fixed and in accordance with EU indications and directives,” Filipi told the Deutsche Welle reporter, adding that it is impossible for a small country like Albania to adopt a model different from regional or European countries.
However, Ilir Barbaja, a deputy director at Albinvest, a government-funded agency promoting foreign direct investment, is in favour of reviewing the economic growth model, describing it as another opportunity for the Albanian economy to turn back to expected growth rates.
According to him, the gist of the new economic model is focusing on investment on information technology.
“This path is appropriate because the development of new technology requires mid-term investments and guarantees high revenues in a relatively short time,” Barbaja was quoted as saying, insisting that IT will serve as catalyst for the country’s struggling economy.
Last month, central bank governor Ardian Fullani said Albania needs to adopt a new economic growth model considering the shortcomings of the current model, based on credit expansion and high consumption rates, and will cooperate with the Oxford University to conduct research on this.
“The future economic growth model requires the drafting of a national strategy on the country’s economic development. The future model should be based on the increased productivity of inputs in all sectors of the economy,” said Fullani last week at a round table meeting on “political and economic challenges on regional cooperation” with Oxford University experts.
The Bank of Albania and Oxford University experts will conduct a series of studies on the Albanian and the regional political economy which will urge scientific debate on the future economic growth model also based on a regional social, economic and political viewpoint.
Governor Fullani said the country’s macroeconomic stability can be guaranteed only if the central bank’s decisions on monetary policy, the supervisory policy and the financial stability interact and are harmonized with the economic growth, the key objective of economic policies.
According to him, the increase and stability of exports is very important for Albania’s long term sustainable economic reforms, while strategic decisions must be made based on this objective.
Government has recently cut spending by 39 billion lek (390 million dollars) for the rest of this year in an effort to keep public debt levels at 59.5 percent of the GDP and reduce budget deficit to 3.1 percent by the end of the year, down from a record 7 percent at the end of last year.
Government has also lowered its GDP growth forecast to 4.1 percent, down from an expected 5.5 percent at the beginning of this year, which is still almost twice higher compared to what international institutions such as IMF and the EBRD expect in 2010.
The Albanian economy saw a significant decline in its growth rate in 2009, from 7.9 per cent in 2008 to an estimated 3.3 per cent in 2009, but remained one of the few European economies which did not suffer a recession.
IMF
According to the IMF, growth averaged some 6ܠpercent during 2005-08, largely based on advancements in total factor productivity, while inflation was kept in check. Although current account deficits had crept up over time, they mainly reflected an ambitious public investment program and transition-driven productivity gains.
Before the crisis, Albania enjoyed strong growth with comparatively benign external vulnerabilities. Sustained macroeconomic stability, a simplification of the tax system, and structural reformsةn the context of subsequent Fund-supported programs and generally good implementation of past Fund adviceبelped boost investment and productivity.
