TIRANA, Feb. 27 – At a time when Albanian politics has entered a deadlock with a lot of uncertainties ahead, economists say a permanent solution has to be found over common tense situations in the run-up to elections so that its effects are not felt by the country’s emerging and slowly growing economy.
Economist Arben Malaj says a reform is needed in the country’s political system so that voters have more say in the election of candidates standing for MPs or local government units, as a first step that would ease political conflict and allow politicians to focus more on reforms to speed economic growth and bridge the huge development gap Albania has with EU member countries.
“The country is facing a critical situation that requires a solution. If the situation continues it will trigger a non-positive domino effect on social, economic and political developments. Insecurity will reduce consumption and individual and private investment and foreign direct investment will remain on hold,” says Malaj, an economy expert who also serves as member with the central bank’s supervisory council.
Zef Preà§i, another economist, says the escalation of the political crisis, will have a series of negative effects on an economy that already has problems with ill-governance, corruption, an inefficient legal system and that growth rates of at least 6 percent are required in order to produce employment and reduce poverty.
“I think lack of brand-name Western foreign direct in Albania is related with ill-governance, pervasive corruption at state institutions, a non-functioning legal system, the paralyzing effect of the country’s oligarchy in the government’s decision-making and law-making in Parliament. In addition, the situation is also related to a decline in the number of consumers and political instability risks in the Western Balkans,” Preà§i, who heads the Albanian Center for Economic Research, has told daily Mapo in an interview.
The comments by the two economists come at a time when the main two opposition parties have abandoned their MP mandates and are staging a series of protests that have sometimes turned violent to call for early general elections over alleged vote rigging in the 2017 elections, accusing the ruling majority of links to crime gangs and destroying the economy through a series of what they call corruptive public private partnerships.
The country will be heading to local elections on June 30, but with huge uncertainties as the opposition is demanding a caretaker government that would handle both general and local elections on the same day.
Arben Malaj
The country is facing a critical situation that requires a solution. If the situation continues it will trigger a non-positive domino effect on social, economic and political developments. Insecurity will reduce consumption and individual and private investment and foreign direct investment will remain on hold. Economic growth will considerably slow down, unemployment and poverty will increase and more will abandon the country. There will be sluggish economic growth, little government revenue, with a huge budget gap and a high public debt level. This negative trend can only be overcome with a package that can reform politics and not an individual deal between party leaders. Without reforming our political system in order to bridge the democratic gap so that representatives are elected by voters and not party leaders both at a local and national level, without clarifying the separation of powers and checks and balances, every agreement on a solution makes useless elections based on the mentality of “you’ll pay the same for what you did.”
Politicians should be aware of the big and clear difference between a party leader and a statesman. People get poorer during every crisis. Our country risks remaining Europe’s poorest forever. Don’t look too far and just watch Greece and Italy where the majority of Albanian migrants live.
Greece’s public debt when the crisis broke out was at 176 percent of the national output and has now reached 220 percent of the GDP. Because of a chain of political crises, Italy never made the structural reforms to become competitive. Now its public debt and the cost of financing its economy are increasing to critical levels. Despite gains by populist parties, its economy is producing more debts, more poverty and less social cohesion as well as more political instability. (Facebook post)
Zef Preà§i
Globally, there is interaction between the economy and politics. When in equilibrium, economy dominates and politics supports its growth and development. But when the equilibrium is ruined, a situation of uncertainty arises and fear among investors increases, especially among foreigners, there is increased lack of confidence in state institutions and consumption is curbed. The situation with the impact of politics on the economy is more obvious in countries with weak institutions, deeply polarized and corrupt like ours. As a rule this happens in the run-up to elections when the main political stakeholders, lacking competitive political alternatives employ tense situations as tools to mobilize party militants as well as increase voter turnout.
We should not exclude the risk of the public administration’s disengagement, a deterioration in tax collection, higher inefficiency and corruption in public procurement. Meanwhile, the unusual move by the opposition through its “en block” boycott has created a new situation, currently with no obvious effect on the country’s economy, but with a series of upcoming unknowns.
I think lack of brand-name Western foreign direct in Albania is related with ill-governance, pervasive corruption at state institutions, a non-functioning legal system, the paralyzing effect of the country’s oligarchy in the government’s decision-making and law-making in Parliament. In addition, the situation is also related to a decline in the number of consumers and political instability risks in the Western Balkans.
Economic growth at less than 6 percent annually is not accompanied with the opening of new jobs and in Albania’s case the positive performance in the past three or four years was mainly based on one or two foreign investment projects contracted a decade ago that will also have its benefits even for this year… proving a strong dependency between the increase of FDI and economic growth. Meanwhile, social inequality has deepened further shaping the high class and what is commonly called the ‘oligarchy’ at a time when the middle class has narrowed and the number of the poor and households in the poverty line has increased. (Excerpts from interview with daily Mapo)
