TIRANA, Jan. 10 – At a time when the Albanian economy is growing amid growing pessimism by businesses and households and thanks to weather-related conditions and a hike in international commodity prices, experts says recovering growth is not translating into better welfare for the country’s residents.
The Albanian economy grew by a decade-high of 4.35 percent in the first three quarters of 2018, but growth was largely driven by a hike in hydro-dependent electricity exports and higher oil, mineral and steel sales following a pickup in global commodity prices.
Economy experts say the government should revise pensions and social assistance levels, which in the majority of cases are estimated at below subsistence levels.
“Economic growth should create wealth in this country and the welfare and social protection systems should redistribute that wealth in order to improve households’ lives,” expert Kosta Barjaba said this week during the presentation of a study by a group of economy and social affairs experts.
Albania’s Supreme State Audit has also recently urged government authorities to immediately consider a long-awaited subsistence level calculation on households’ basic needs in order to efficiently fight poverty reduction in the country.
Back in 2016, a study backed by the Ombudsman’s office calculated Albania’s subsistence level at 16,000 lek (€128) a month, an amount unveiling that current minimum wages, social assistance, unemployment benefits and pensions are too low for hundreds of thousands of workers and pensioners
The World Bank estimates that 28 percent of Albania’s population lives on US$5.5/day, in a poverty rate that is higher compared to other regional EU aspirant countries.
Ardian Civici, an economy expert, says Albania’s growth during the past few years has been quantitative relying on low value-added sectors rather than qualitative.
“We’d better have a qualitative economic growth at a lower rate, but sustainable and as a result of technology and higher productivity, rather than quantitative growth that comes from low productivity sectors such as the garment and footwear and the call center,” says Civici.
Civici, who earlier served as a member of the central bank’s supervisory board, says about 80 to 85 percent of economic growth in Albania originates from less than 20 percent of economic stakeholders and as a result the overwhelming majority of its benefits go in favor of this small group.
“Despite some positive changes during the past decade, Albania is still part of those countries with exclusive growth, meaning that the number of economic stakeholders who contribute to GDP growth is still low compared to the total economic stakeholders and as a result even the ‘lion’s share’ of economic growth goes almost entirely in favor of these stakeholders, triggering huge gaps in income and economic and financial benefits,” Civici has earlier said.
Expert Arben Malaj says Albania should be well-prepared to handle the effects of another potential global financial crisis and undertake anti-crisis packages.
Albania was one of the few countries to avoid recession in the aftermath of the global financial crisis, but growth rate lingered between 1 to 3 percent for around 8 years until 2016 and current growth rates of around 4 percent fuelled by some major energy-related projects are still considered below the required 6 percent rate for sustainable growth.
In a recent research paper, Malaj said that the massive migration that Albania has faced during the past 25 years could soon find the country facing a number of serious challenges that require transforming the Albanian economy into more dynamic by easing domestic and foreign investment.
“The most important challenge for Albania is turning the economy into a dynamic economy that eases local and foreign private investment, provides access for companies targeting emerging markets and companies with an ever growing need for young and experienced talents,” says Malaj,
Selami Xhepa, another economy expert, says the concentration of credit in few hands also affects the quality of economic growth in the country at a time when credit has been growing by moderate rates of 3 to 4 percent when adjusted for effects such as the euro’s free fall against the Albanian lek, and the write-off of non-performing loans, still at a high level of around 13 percent.
“The paradox of development in Albania is that during almost three decades of transition, economic growth has been strong, even though on a downward trend from one decade to another. Yet, real income and consumption, the real indicators of a society’s (material) welfare have only slightly increased,” Xhepa has earlier said.
