This latest European crisis is a different beast, and it should be treated as such.
TIRANA, Nov. 15 – Despite words of praise by the government about the state of the Albanian economy, things are continuing to deteriorate. The economic situation in Albania is largely due to regional and global factors, but some aspects are very local, and they demand attention and solutions.
The results of recent studies by the Bank of Albania reconfirm the difficult situation both households and businesses are facing as the crisis impact on Albania escalates with domestic consumption failing to recover because of consumers’ falling purchasing power and their rising saving trend as they expect harsher times ahead.
The situation has also affected businesses which have cut jobs and investments and are struggling to survive. Bad loans at an official 22.3 percent at the end of the third quarter of 2012 is the clearest indicator of the difficult situation both consumers and businesses are facing to pay off loans they took in better times. (See more on this issue in our business section.)
But perhaps the most disturbing news is Bank of Albania’s survey published this week, which has confirmed what many Albanians have suspected, but rarely quantified until now. The most vulnerable part of the population is starting the feel the effects of the economic crisis where it hurts most – its ability to pay for basic survival.
The central bank’s survey of 1,200 families found that roughly 5 percent of Albanian families owe money to neighborhood shops that keep what Albanians call “the lists” – a record of goods, mostly food, given to families who can’t pay right-away, put who promise to do so in the future. It is a form of basic borrowing that has been part of Albanian society for decades, but which lately has taken a life of its own. It’s a warning sign that needs to be seen in the context of the fact that one in three households and one out of two businesses owe money both formally and informally, while 54 percent of households have borrowed money informally from family and friends as banks have tightened their requirements. It is a sign the formal economy has taken a step backward as the crisis takes its toll.
This quantified data also comes with anecdotal evidence Albanians see everyday. Many businesses and stores are closing their doors unable to handle the decline in demand.
All this is combined with the larger bad news that the Eurozone hassunk into recessionfor the second time since 2009. During the third quarter of 2012, the 17 economies sharing theeuro shrunk by a collective 0.1 percent, after declining 0.2 percent the previous term. Those two quarters of decline meet the definition of recession.
Albania is not officially in recession, but the government and the central bank need to take measures to help those at the very bottom of the economy and do anything they can to stimulate the local economy. The country might have weathered the earlier years of the global financial crisis fairly unscathed, but it cannot rest on its laurels. This latest European crisis is a different beast, and it should be treated as such.
