In press briefing, Bank of Albania Governor Ardian Fullani offers an economic analysis of Albania’s economy for the past six months, and backs the government proposal to revise this year’s budget.
TIRANA, Jan. 27 – Albania’s central bank has kept its key interest rate unchanged at 5.25 percent and is confident Albania’s economy will improve after a slower, but still positive, growth of 2009, Bank of Albania Governor Ardian Fullani said this week.
Mr. Fullani also asked the government to be careful with public spending and debt in order to avoid placing undue pressure on Albania’s economy.
The central bank governor made the comments in a press briefing, offering an economic analysis for the last six months of 2009.
Mr. Fullani said 2009 was a tough year, but added that Albania faired well compared to other countries.
“The year that left behind was hard on the economy. But we faced the crisis successfully,” Governor Fullani said. “The stimulating measures we offered were successful.”
BoA’s governor said the economic crisis did hamper economic development even through Albania never officially entered recession, which is defined by an economy that shrinks.
Signs of the effects of the global economic crisis can be seen as public investments have been declining and private investments shrank, Governor Fullani said, adding import and export levels also fell in the past six months.
Public debt risky
Bank of Albania Governor Fullani also urged the government to reduce the public debt in order to preserve the country’s macroeconomic stability.
Declining revenues and higher costs have deepened the budget deficit, which the government is now forced to finance through international loans.
Recent moves in that direction increased the country’s public debt to 58 percent of GDP by the end of November, and that’s high, according the central bank.
“Bank of Albania deems it necessary for future policy to focus on reducing the debt as a prerequisite for the country’s macroeconomic stability,” Mr. Fullani said. “As we have stated previously, reducing the public debt will reduce pressure on public sector financial markets by creating more space in the private sector.”
Bank of Albania backed the latest move by the country’s Finance Ministry to revise this year’s budget to spend less, a project which has been submitted for government approval.
“Bank of Albania welcomes recent moves in terms of budget correction. It is fully in line with our suggestions, and it is fully line with international developments,” Mr. Fullani said. “It’s a strong sign of awareness [on the government side] that it will apply prudent policies in the future.”
Floods to increase inflation
The recent floods in northwestern Albania will likely put pressure on the Albanian economy by increasing consumer prices, according to the latest estimates of the Bank of Albania.
Governor Fullani said the situation will lead to less Albanian agricultural products in the market, increasing prices.
The government compensation scheme for the flood victims will also put a dent in the state budget for this year, he added.
Latest figures
Albania’s annual inflation in December stood at 3.5 percent, while average inflation in 2009 was 2.2 percent, Mr. Fullani said. He added inflation has an upward trend, reaching 3.5 in December.
“The economic slowdown, the low prices of main products in the world markets, the low monetary expansion in the economy and controlled inflationary expectations have compensated for the inflationary pressures coming from the decline of the exchange rate during 2009,” Mr. Fullani said.
Citing figures from Albania’s own statistical agency, INSTAT, Fullani said Albania’s GDP grew during the first nine months of 2009 at 4.9 percent, down from 7.8 percent growth in the same period in 2008, but it had been characterized by a progressive slowdown during 2009.
