Tirana Times
TIRANA, September 13 – 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 last week at a round table meeting on “political and economic challenges on regional cooperation” with Oxford University experts.
The Bank of Albania and Oxford University experts will conduct a series of studies on the Albanian and the regional political economy which will urge scientific debate on the future economic growth model also based on a regional social, economic and political viewpoint.
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.
According to him, the increase and stability of exports is very important for Albania’s long term sustainable economic reforms, while strategic decisions must be made based on this objective.
The banking system’s role in identifying the priority and profitable sectors is also important in this respect to guarantee their continuous financial support.
The central bank says the key to successful economic growth strategy is regional cooperation and EU integration.
“There are many models supporting the conclusion that our growth models should be seen as complementary and not as competitive,” said Fullani, personally supporting a model which benefits from the economy of scale promoting and using the advantages of the existing competitive positions and increasing the economic welfare of the whole region and individual economies.
Bank of Albania analysis shows Albania’s foreign trade with EU countries is at optimal levels while trade with regional countries remains below its potential.
Government has recently cut spending by 39 billion lek (390 million dollars) for the rest of this year in an effort to keep public debt levels at 59.5 percent of the GDP and reduce budget deficit to 3.1 percent by the end of the year, down from a record 7 percent at the end of last year.
Government has also lowered its GDP growth forecast to 4.1 percent, down from an expected 5.5 percent at the beginning of this year, which is still almost twice higher compared to what international institutions such as IMF and the EBRD expect in 2010.
The Albanian economy saw a significant decline in its growth rate in 2009, from 7.9 per cent in 2008 to an estimated 3.3 per cent in 2009, but remained one of the few European economies which did not suffer a recession.
IMF
According to the IMF, growth averaged some 6ܠpercent during 2005-08, largely based on advancements in total factor productivity, while inflation was kept in check. Although current account deficits had crept up over time, they mainly reflected an ambitious public investment program and transition-driven productivity gains.
Before the crisis, Albania enjoyed strong growth with comparatively benign external vulnerabilities. Sustained macroeconomic stability, a simplification of the tax system, and structural reformsةn the context of subsequent Fund-supported programs and generally good implementation of past Fund adviceبelped boost investment and productivity. As a result,
World Bank
Last June, the World Bank chief economist for Europe and Central Asia, Indermit Gill said in a conference in Tirana that “Albania finds itself today as an emerging economy, blessed with an abundance of natural resources, a young labor force and a strategic location, but one that is emerging from transition into a world with much greater uncertainty. Times like these present an opportunity to focus on the short, medium and long term challenges to grasping its potential as an emerging economy the crisis will continue to reduce growth rates in all countries Europe and Central Asia, including Albania. Its debt levels of close to 60% of GDP are higher than other countries of the region, and there is a need for fiscal consolidation, in order to reduce the risks of the debt for macroeconomic stability”.
Roland Clarke, Country Economist for Albania, highlighted the importance of continuing efforts to improve the quality of education, the importance of supporting the development of ICT, and improvements in the business environment required full implementation of laws and regulations. Finally he noted that macroeconomic stability was critical, and that this required cautious assumptions when planning budgets, and the need to reduce debt levels.
