Artan P쳮aska
apernaska@tiranatimes.com
Economic growth in Albania will decelerate, says the latest report on the world economy by the World Bank. For the current year (2009), the World Bank foresees a limited growth of 1.5 %. That is still better than previous predictions by the International Monetary Fund (IMF), which limited growth expectancy to 0.4 – 0.5 % for the current year, but far short of the previsions made by the Albanian Ministry of Finances (MoF) that predict a growth of 4.5 – 4.8 % for 2009, quotes the Albanian local press (Shqip, 23.06.2009).
The World Bank predictions contradict also Albanian MoF’s optimism on next year’s economic growth. Whereas the Ministry of Finances expects 6 % growth for 2010, the World Bank predictions speak of 2 % growth for 2010 and 3 % growth for 2011, foreseeing a very slow recovery after impetus lost in 2009. This is even worse than the International Monetary Fund (IMF)’s previsions for 2011.
The World Bank assesses economic growth for 2008 in Albania at 6 %, but estimates a return to such a rate of growth delayed in time by current economic conditions.
Previsions made by 2009 2010 2011
World Bank + 1.5 % + 2 % + 3 %
International Monetary Fund + 0.5 % + 2 % + 6 %
Ministry of Finances of Albania + 4.8 % + 6 %
Source: Shqip, 23.06.2009. Realization: A. P.
An even less positive prediction is the one stating for “Ű % economic growth for 2009 according to the most optimist scenarioŢ voiced by experts of the Vienna Institute for Studies on International Economy. In this context, the Albanian previsions seem, at best, unrealistic. Shqip speaks of “ƥlectoral optimism”.
In the World Bank’s “Global Development Finance 2009 – Charting a global recovery” report, released on the 22nd of June, the global GDP, or else expressed as the global output, is expected to fall by 2.9 % in 2009, world trade is expected to fall by nearly 10 %, and private capital flows are expected to decline from 707 billion US Dollars (USD) in 2008 to 363 billion US Dollars (USD) in 2009.
Referring to the importance of migrant’s remittances in Albanian as well as in neighboring economies, the World Bank’s report states that “Over 10 percent of GDP in Albania and 5 percent in Romania and Bulgaria came from migrant remittances in 2007”. Pursuing further analysis with a regional scope the report accounts that: “With many migrant workers employed in the European sectors hardest hit by recession (ũ, receipts of remittances in the CEE [Central and Eastern Europe] region increased by only 5 percent in 2008, compared with 21 percent in the previous year. ŠUnemployment in the CEE region rose in February-March by one percentage point over the average rate prevailing in the first half of 2008”.
The Albanian press has over the last years confirmed successive drops in remittances. The problem touches not only Albania and Kosovo, but also neighboring countries with Albanian populations, such as Montenegro and the Former Yugoslav Republic of Macedonia. On 23rd of June, Koha, the renowned Albanian daily of the Former Yugoslav Republic of Macedonia, in an article titled “Migrants and moneyless” reported that in the Former Yugoslav Republic of Macedonia, the homecoming of migrants and remittances sent by them have affected GDP growth up to 20 %, but that the tendency has been on a lowering of such income over the last two years. A tendency that expert Abdylmenaf Bexheti confirms for the current year as well. The analysis he makes, shifts the focus from the global income out of migrant remittances sent from abroad taken as the sole factor, to an extended total including also migrant expenditures at home during their holidays (hence migrant remittances and expenditures). Homecoming for the summer season might be constricted from difficulties in the countries where the migrants live. The Former Yugoslav Republic of Macedonia, where at least one fourth of the population is Albanian, is expecting up to 200 million Euros less from migrant income for the current year.
For its part, Albania is reported to have seen a decrease in the amount of migrants returning home as well as a decrease in the numbers of Albanians from neighboring countries (Kosovo, the Former Yugoslav Republic of Macedonia, and Montenegro) taking holidays at the Albanian seaside.
Besides, the exceptionally high ratio of control of the banking system from foreign banks and capitals puts Albania in an uneasy situation and makes the country susceptible to confronting more difficulties in the future, puts up the report. “Growing concerns over credit risk and problems with cross-currency and foreign-exchange swap markets are likely to sharpen the so-called home bias in bank lending. Šin the interest of improving their capital ratios, banks may prefer to continue limiting their cross-border exposures, which typically involve higher regulatory capital charges to compensate for currency or country risk” further states the World Bank “Global Development Finance 2009 – Charting a global recovery” report.
Data from a previous report of the World Bank entitled “Global Development Finance 2008 – The role of international banking” show Albania to have been in 2006 in the group of countries with almost 90 % to 100 % of the banking system controlled by foreign banks or capitals, with 93 % of its banking system under foreign control. Recent data published by the Tirana Times in our “Insights on the Banking System” series show the banking system to have evolved towards 95 % of foreign control in the last two years.
“The participation of foreign banks in developing countries’ financial systems has increased rapidly in recent years. At the end of 2007, the 910 foreign banks with a presence in developing countries controlled combined assets in excess of $1.2 trillion and accounted for more than 39 percent of total domestic banking assets. ŠIn some countries, such as Peru and Mozambique, their share is almost 100 percent, while in others, such Albania and Croatia, one or two foreign banks control the largest share of the local banking system” – writes the “Global Development Finance 2009 – Charting a global recovery” report.
The report makes aware that “The risk that banks may reduce their support for subsidiaries in developing countries has also grown”. According to data quoted in both World Bank reports, foreign control over the local banking systems in Eastern European countries seems to vacillate around 70 %. Albania seems to under-perform the regional “standard”.
Former predictions by the World Bank listed in the “Global Development Finance 2008 – The role of international banking” report, (series of predictions established at the close of 2008 year whence the economic growth was established at 6 %), expected economic growth to reach 6.2 % in 2009 as well as in 2010.
