Economic forum “absolves” government’s impotence in front of the crisis

TIRANA, 11 March 2009 – An economic forum was organized yesterday by G99, a political group, to answer the question if Albania was affected by the global economic crisis or not.
Four panelists discussed the economic situation in the country and all agreed that global crisis will have a huge impact in Albania. Yet, none of them was able to offer practical solutions to cope with such crisis. Instead, they agreed that given the current economic conditions in Albania, there was not much the government could do.
“We are a low income country, there’s not much we can do,” Milva Ekonomi said. She explained that a considerable part of the population will fall under the poverty level because of the crisis. Statistic offered by Ekonomi, former INSTAT director for 12 years and current President of Agenta Institute for economic matters, showed that the current government had spent more on social assistance programs than any of the previous transitional governments.
“It is easy to give advice, but much harder to implement,” Gjergj Filipi, a Research Director at Agenta Institute, observed.
“Albanian budget has no space to increase its expenditures and with diminishing revenues we have to think how to cope with an ever increasing deficit,” Sagita Muco said. She is a current Economic Advisor at the International Civilian Office amd EU Special Representative in Kosovo.
Former deputy Minister of Economy, Ilir Ciko, observed that given the strong economic relations between Italy and Albania, then we can expect the crisis to originate mainly from these ties. According to Ciko, Albania is the country with the strongest economic ties in the region with EU countries and our EU partners are considerably suffering from the current crisis. Italy, which counts for almost half of Albania’s foreign trade and the biggest exporter of Albanian products, will suffer a 2.5% drop in GDP and experts expects Italian economy to recover only by 2011. Italians themselves expect their foreign trade to shrink considerably. In addition, remittances coming from Italy consist of 1/3-1/4 of all remittances coming from abroad. As a result, consequences should be many whether in regard to public finance or in regard to the poorer levels of the population.
According to IMF, and other data sources, remittances have covered for 15% of GDP in the previous years, but last year they dropped to just 11.5% of the GDP. This years estimations predicted remittances to be no higher than 9.1% of the GDP. If we calculate that 1% of GDP accounts for 100 million dollars, then Albania is to suffer losses in hundreds of millions of dollars just from remittances. It will translate into less imports and decreased revenues for the state budget.
Budget revenues should decrease this year, while interest expenses from public debt are increasing. Banks don’t seem able or willing to cover the governments demand for domestic financing. From the total budget of 3.8 million US dollars, 75% are operational expenses. From the remaining 25%, a good part is investments with foreign financing with preset destinations. Another part is set for the Durres-Kalimash highway and the remaining part is simply too small to maneuver through the crisis.