A performing economy with a lagging business environment says report

TIRANA, June 24ؔhe “Trading Safely” report for 2009 characterized the Albanian economy as experiencing a slowdown in the growth rate from the 6% that it achieved in 2008 to only 4% this year as a reflection of the international economic crisis. This latest forecast was very close to the latest declaration made by the Ministry of Finance, which declared that economic growth for 2009 would be around 4.5%. Other forecasts give a much lower rate of GDP growth, while still preserving positive growth below 2%.
The report from “Trading Safely” gave Albania a D for its economic performance while stating positively that microeconomic stability and inflation are well preserved.
“Economic growth remained strong in 2008 amid buoyant domestic demand, driven by the expansion of credit and expatriate worker remittances, and public sector investmentŠDespite the rise of prices for energy and food products, inflation has remained limited, compared to most regional countries. A slight growth slowdown will nonetheless be likely in 2009 due to fallout from the international financial crisis,” Trading Safely reported.
The Center for Research and Studies in International Economics evaluated Albania as having achieved some progress regarding its public policies, improvement of productivity, social situation and living standards. However, it warns that the deep current deficit will continue to be an economic burden, where increase in domestic demand won’t be able to replace the fallout in foreign demand.
The report graded the current business climate in the country with a C, arguing that “Ʋeforms affecting the business environment (overhauling the civil service and the legal system, combating corruption and organized crime) have been laggingŮ” In addition, corporate financial information was judged to be unavailable, or, at best, unreliable and: “Ƅebt collection is unpredictable. The institutional framework has many troublesome weaknesses. Inter-company transactions run major risksŢ
Generally, the “Trading Safely” assessment is similar to reports made by institutions such as the Bank of Albania or the World Bank.
Strong criticism continues to be aimed at the banking system, which, despite overall sound assets, is often accused of limiting its credit to the economy, while it has increased credit in foreign currencies, thus exposing borrowers to exchange rate risks. The Bank of Albania has accepted that its move to lower the base interest rate with 5% earlier this January benefited only credit to banks themselves, but not business and individuals. Advice on exports is also noteworthy. Albania is strongly encouraged to diversify its exports in order to make up for decreased foreign demand, competition from low cost countries, and lose its dependence on the Italian market. So far the export industry remains concentrated on textiles.
Even though the World Bank ranked Albania among countries with moderate risk to be affected by the global crisis, the country seems to lack countermeasures instruments. The current fiscal policy has already reduced taxes on businesses to a bare minimum, public debt has increased, and remittances from immigrants are in decline with a possibility of not recovering. In short, the budget has been stretched beyond its limits in a time when revenues are in decline. Meanwhile, despite the positive attitude of Albanian authorities, sectors of the economy have already shown to be in crisis.