TIRANA, May 3 – Albania’s central bank says the political deadlock in the run-up to the June 17 general elections has not had any major impact on the country’s economy but its possible escalation would for sure affect the investment climate and business and consumer confidence, leading to a revise downward in the country’s expected GDP growth.
Introducing the Bank of Albania annual report at the parliamentary economy and finance committee this week, governor Gent Sejko said the central bank was closely monitoring the situation after observing no major impact in the year’s first quarter.
“In case of protracted political tension, of course there would be a downward revision of economic growth. The Bank of Albania made its macroeconomic forecast calculations considering the fact that this is an electoral year. We will monitor further developments, but in principle if there is protracted political tension, of course this would not help and affect investments and initiatives and mainly consumer confidence and confidence in investments that have already been carried out,” Sejko told journalists.
The comments come after the main opposition Democratic Party and its allies have been staging a protest for more than 70 days threatening to boycott elections unless a caretaker government is set up while a deal has not yet been reached with the ruling Socialist Party-led government seeking a second consecutive term.
“We cannot talk about an accurate figure for now. We are monitoring the situation and looking at the impact the political situation could have. Currently there is no change or deviation in the macroeconomic parameters we are monitoring such as credit or the economic growth rate,” said governor Sejko.
“Referring to figures for the first quarter of this year, the Bank of Albania estimates that there is no substantial diversion. I would like to re-emphasize that in case of protracted political tension, of course this will also be reflected on the economic climate. We will monitor the situation and publish our assessment in our reports,” added the governor, optimistic that ‘things will be back in the right direction.’
International financial institutions such as the IMF and the World Bank have also warned the escalation of the political crisis putting the June 18 elections at risk could hurt both public finances and deter investment.
The main opposition Democratic Party and its allies have been staging an indefinite protest in front of the Prime Minister’s office in Tirana’s central boulevard for more than two months since a Feb. 18 rally, boycotting Parliament. Opposition parties say they are set on boycotting even the June 18 elections unless they receive guarantees about impartial handling of elections which they claim are endangered by people with criminal records and drugs money from massive cannabis cultivation.
Negotiations to broker a deal have so far failed, further heating up the tense political climate which also has a negative impact on investment and country’s promising tourism industry as Albania gears up for its peak 2017 season. However, ongoing negotiations will apparently lead to a last-minute deal that will probably see the elections postponed to give the opposition time to register for elections as legal deadlines have already expired.
The Albanian economy grew by 3.4 percent in 2017 and is projected to further pick up to 3.8 percent this year, mainly thanks to some major energy-related investment such as the Trans Adriatic Pipeline and the Devoll hydropower plant as well as a boost in the emerging tourism industry.
Public finances in the first quarter of this year seem on track with a 4.3 percent hike boosted by the key VAT and excise duties while public investments rose by an annual 30 percent to 9.5 billion lek (€70 mln). However, the real effects of political tension could better be observed by second quarter data and statistics on FDI and tourism revenue for the first half of this year.
