By Selami Xhepa*
I think the 2018 economic developments will be within the targets set in the macroeconomic program; with an economic growth which I believe will be at about 4 percent and with stable macroeconomic indicators. There is no particular imminent threat to developments with the budget deficit, inflation and the currency exchange rate.
However, beyond this picture of macroeconomic normality, a series of other indicators characterizing the economy are still unstable and I believe they will remain such even in 2018. Maybe some of them could even deteriorate, such as the public debt which due to a series of concession projects scheduled to be carried out by public authorities will lead to the public debt risk increasing in the future and perhaps the investors’ perceptions could also turn negative.
Secondly, the financing of economic growth could also continue to be problematic. The banking system is facing challenges of a critical portfolio accumulated during the years of an economic boom and limited to a small number of big companies. That will continue to curb lending to the economy and the expansion of new investment.
I think that the banking system desperately needs a new business model which diversifies into new companies and not only into big firms that have a high probability of turning into ‘zombies,’ devouring credit and putting the economy at risk as a whole.
Thirdly: Financing through foreign direct investment should be more active and based on projects. Personally, I don’t see any factor that could have a tangible impact on this. In addition, the improvements in the country’s business climate are not clear and investors’ problems with bureaucracy, corruption and lack of rule of law as a whole, remain an important priority.
Fourthly: The unemployment issue or to put it better the creation of new jobs at satisfactory salaries will be a challenge on which there is no special treatment by public authorities. For this reason, social issues will continue to remain serious.
Taking that into account, I believe the normality of the 2018 economic developments will not make any important difference into the households’ welfare or the quality of economic growth in the country.
*Selami Xhepa is a former politician and economist who heads the “Pashko” European Institute, a Tirana-based think tank named after Gramoz Pashko, a late Albanian economist and politician who led the country’s shock therapy in the early 1990s when the communist regime and its planned economy collapsed.
