As the summer ends, and talk of endless reforms returns to the political debate, the sobering facts about the country’s economic conditions cannot and should not be ignored.
Economic growth is stuck at about 1-2 percent, which for a country in Albania’s state of development is a negative indicator. Official unemployment is at 18 percent, and up to 30 percent among young workers. (The unofficial but real numbers are higher.) Private sector wages have not increased in six years, despite a steady inflation rate. Public debt has surpassed 70 percent, adding to the costs of servicing it. Bank lending is sluggish, showing lack of domestic investment in the economy. Foreign investments, beyond a couple of large energy projects, are either stagnant or dropping.
The government’s own data shows it has failed to meet revenue targets in the customs and tax departments. It had to cut the state budget earlier this year, meaning there will be even less public investment into the economy, which is needed to prop it up as the private sector is to fearful or too poor to invest.
The government has largely escaped criticism for the country’s economic performance in the first two years of its mandate, because the economy, like a large ship, takes a while to show a change of direction from the moment that a change of direction takes place at the helm.
And the Socialist-led government has for two years blamed all of the country’s economic problems on their predecessors in power, the Democrats. But two years into a Socialist-led government, there is evidence that it has failed to deliver on its promises of a better economy and things do not look very bright for the next two years, according to predictions by international organizations.
In addition, the judgment and expectations on the Socialist-led coalition will be even higher now that it holds virtually all the levels of power in its hands, having crushed the Democrats both in national and local administrative elections.
To be fair, some of the economic difficulties Albania faces are due to factors outside the country. The Greek financial crisis and the economic malaise in the region and beyond are real and they do affect Albania through lack of investment and remittances.
But there are many economic experts who believe the government’s own policies have made things worse, not better. Some of them might have been good on paper, but they have failed to deliver the needed results.
The business community has said in unison the government’s higher tax policies are bad for the economy. At 15 percent, up from 10 percent two years ago, Albania can no longer compete with neighbors like Macedonia, business representatives say, adding the government’s ideas and goals on paper – such as progressive taxation – have failed to succeed in Albania’s economic conditions.
The government has promised it will turn its attention to fight economic informality next. The plan is to repeat the success of power bill collections, when the government gathered an extra €100 million, sending hundreds of people to jail in the process, largely small business owners and family consumers who had illegal ties to the power network.
Formalizing the economy is a laudable goal, but doing it with campaigns and threatening people with jail time is not the way to go. There is a better way: Building trust, making procedures simple and lowering taxes — convincing people to join the system.
The darker side of punitive campaigns and the dire economic conditions at home can be seen in the nearly 30,000 Albanians who have sought asylum in Germany to escape from poverty and lack of opportunity in Albania. It is not “a misunderstanding” as the prime minister wants to sell it. These people want to leave because they believe Albania is not a good place to live in. Two in three young Albanians want to leave the country for greener pastures, polls show. And after two years in power, the Socialist-led government must accept it also shares part of the blame.
As the Albanian government pets itself in the back for every little project with its masterful PR campaigns, there is no way around the sobering truth: The Albanian economy is in bad shape and there appears to be little hope of growth in the short to medium term.
The municipal elections showed that Albanian voters continue to support the ruling coalition, but simply winning elections is not a show of success. The shape of the country you govern, the quality of life and opportunities you offer your citizens are also important. The government must not forget these facts.
Written by Andi Balla, aballa@tiranatimes.com
