BoA study reveals measures for increased competitiveness

TIRANA, July 12 – The improvement of Albania’s competitive image in international markets would require the continued increase of the labour productivity, modern technologies implementation and efficient labour force utilization in the production process in the economy, says a recent study prepared by the two Bank of Albania experts. Such a strategy would create positive ground for strengthening exports, a precondition for enlarging the tradable sector of the economy. “This strategy should also incorporate cautious monitoring of wages. Wages increase should be supported by the labour productivity growth, in order to ensure an equilibrated impact to the monetary policy. Meanwhile, the wage increases should serve, among other, as a driver to labour productivity growth,” says the study called ‘Competitive position of the Albanian economy in terms of productivity and labour cost.’
The measurement of labour productivity of the Albanian economy for the period 2003-2010 indicates a downward trend of this indicator. Labour productivity indicator performance varies among sectors, highlighting a higher productivity on average term in industry and service activities classified as tradable. LP trend in construction’s branch reflects, among others, the high degree of informality, while in agriculture it identifies the need for a broad and cautious monitoring of labour market.
The relative backwardness in terms of new technologies implementation, innovation and the low export share to the economy have made the tradable sector suffer from low efficiency of labour force utilization, hence damaging the aggregate LP and Relative labour productivity indicators.
According to the 2011 Index of Economic Freedom published by The Wall Street Journal and The Heritage Foundation, Albania’s economic freedom ranks among the best in the region, lagging only behind neighbouring Macedonia. Albania ranked 70th in the index, sandwiched between Portugal and Belize, and performing better than most Balkan countries. “Albania’s economic freedom score is 64, making its economy the 70th freest in the 2011 Index. Its level of economic freedom declined by 2 points during the past year, due primarily to decreases in trade freedom, investment freedom, freedom from corruption, labor freedom, and its government spending score. Albania is ranked 33rd freest among the 43 countries in the Europe region, and its overall score is above the world average.” Albania has achieved strong economic growth over the past five years, driven mainly by the services and construction sectors and reflecting significant diversification of the economic base. Albania’s overall economic freedom score is constrained by weak property rights and pervasive corruption. The low property rights score is largely a result of political interference in the judiciary.