Tirana Times
TIRANA, Oct. 26 – The current economic year-on-year growth, at 2 percent in the first quarter of 2010 and at 3.3 percent in the second quarter, rates which are expected to produce a GDP growth of around 4 percent, will be impossible to improve the country’s high unemployment lines. The warning was given this week by Bank of Albania governor Ardian Fullani in a press conference after the central bank’s Supervisory Council decided to keep the key interest rate unchanged at 5 percent and examined the monetary policy report for the third quarter of this year.
“Although positive, the economy’s growth rate seems insufficient to produce real improvement in the labour market and lower unemployment rates. In the meantime, the economic growth stability remains fragile in the short term,” Fullani told a press conference.
Albania’s unemployment rate continues remaining high despite a slight decrease in the second quarter of this year and signs of economic recovery. Latest data by the Institute of Statistics (INSTAT) show the jobless rate in the second quarter of 2010 dropped to 13.78 percent, down 0.5 percent from the previous quarter.
This was mainly a result of a 0.2 percent year-on-year increase in the number of people employed in the private non-agricultural sector.
Governor Fullani called on lawmakers to set a new equilibrium between short-term economic growth and long-term stability describing this year’s boom in exports, also helped by huge electricity sales, as insufficient.
The central bank says the country’s external position remains fragile and requires measures to reduce current account deficits and increase foreign currency inflows.
The preservation of the current export rates is considered one of the main objectives in the short and long-term.
“The sustainable and long-term promotion of Albanian exports requires undertaking structural reforms to increase the competitiveness of Albanian economy. This would serve the shift to a more sustainable economic growth model and at the same time lower dependency on foreign sources of finances,” says the central bank.
The decrease in immigrant remittances, the contraction in consumer loans, lower retail sales and consumers’ rising saving trends suggest that the consumption growth rates remain below expectations in the second and third quarters despite signs of rising import of consumer goods and improved in confidence.
Lower public spending following budget cuts will also affect growth rates this year, making consumer and business behaviour and their support with loans the main contributors to economic growth, says the central bank.
However, the economy’s overall performance during the third quarter of this year is estimated to have continued at slightly more than the 3 percent growth rate of the April-June period.
“The poor fiscal stimulus impact and the widening trade gap trends seem to have been compensated by a good performance of tourism,” said Fullani.
Ministry statistics show some 1.3 million people visited Albania during the July 1 to August 15 period, some 32 percent more than the same period in 2009.
Tourism revenue during this summer remain to be seen in the third quarter statistics which will make available the central bank’s report on the two peak months of July and August.
BoA lending analysis shows the economy’s demand is not the same as the number of projects to support it with lending, remaining a constant concern for the central bank which is considering measures to boost lending along with commercial banks operating in Albania.
The economy’s third quarter performance was characterized by a gradual improvement in aggregate demand, lower risk premiums and consolidated macroeconomic stability.
Inflation rate remained under the central bank’s ѱ traget, the external position improved while the exchange rate stabilized.
Meanwhile, liquidity improved and interest rates were in decline, slightly reflecting the central bank’s measure to cut the repo rate by 0.25 percentage points last July.
New economic growth strategy
Central bank governor Ardian Fullani says Albania needs to adopt a new economic growth model considering the shortcomings of the current model, based on credit expansion and high consumption rates, and will cooperate with the Oxford University to conduct research on this.
“The future economic growth model requires the drafting of a national strategy on the country’s economic development. The future model should be based on the increased productivity of inputs in all sectors of the economy,” said Fullani at a recent round table meeting with Oxford University experts.
Governor Fullani said the country’s macroeconomic stability can be guaranteed only if the central bank’s decisions on monetary policy, the supervisory policy and the financial stability interact and are harmonized with the economic growth, the key objective of economic policies.
Economy recovering slowly
The Albanian economy continues growing at low rates mainly because of the ongoing crisis in the construction sector and lower foreign direct investment and immigrant remittances triggered by the global financial crisis.
The latest data published by the Institute of Statistics (INSTAT) show the Albania economy grew by 3.3 percent year-on-year in the second quarter of this year and 2.4 percent compared to the first quarter of 2010.
Industry, trade and transport had the biggest impact on the second quarter performance growing by 31.8%, 12.7% and 8%, respectively compared to the same period last year.
Meanwhile, construction and telecommunications, two of the country’s most vital sectors in previous year, continued suffering, registering negative growth rates.
INSTAT year-on-year data show construction activity fell by 29 percent while telecommunication market shrank by 2.6 percent in the second quarter of 2010.
Compared to the first quarter of 2010, industry, trade and transport registered growth rates of 11.2 percent, 3.3 percent and 2.7 percent, respectively.
Data published by the Albanian National Institute of Statistics, INSTAT, show that the country experienced a slowdown of economic activity in the last quarter of 2009.
The growth of gross domestic product, GDP, decreased by 0.8 per cent in the fourth quarter of 2009 compared with the same quarter of 2008 and registered a 2.4 per cent drop compared with the third quarter of 2009.
