BoA Governor, warns Albanians on possible economic crisis

Albania is a country consuming more than it is producing and financing its spending by borrowing. BoA governor, Adrian Fullani, said that the country risks an economic crisis if the situation persists. The high levels of consuming and, as a result, of borrowing, continues due to Albanian expectations of securing higher incomes in the near future. “The current global economic crisis happened exactly for the same phenomena” warned Fullani. What happens, according to officials, is that individuals and families create a growing personal deficit by spending more than they earn and they finance the gap by borrowing from banks. Also, rising real estate prices add to the problem. The global credit crunch will not delay its consequences even in the Albanian economy, said the governor.
As a result, a drastic change in consumer behavior is need in Albania. Families cannot pay their debts and maintain the same level of consumption at the same time. Therefore, a drop in demand will follow, which, in return, will slow down economic production and will results in a depreciation of the currency.
Also, higher incomes will not solve the current deficit problem. However, higher incomes will result in higher prices and inflation. Such a situation will hasten the economic crisis and even worsen it.
Also, higher energy and fuel prices have not helped. The Albanian deficit increased by $2.3 billion last year. Though, previously, remittances from abroad were a good source to cover a part of the deficit, now the story has changed. Not only is the deficit too high, but remittances themselves are dropping for various reasons. First, immigrants are currently suffering from the economic recession, just like the rest of the world. Second, many of them are creating families or becoming naturalized in their respective new countries, therefore losing ties with Albania. There is a necessity to replace this source of income with another, yet nothing has been done about this. And if remittances made up 50% of the deficit in 2007, this year they account only for 39.2%.