TIRANA, July 3 – Albanian economy expert Suzana Goxholli describes the first quarter growth in the Albanian economy as largely accidental and fuelled by heavy rainfall and energy exports with not much impact on the welfare of Albanian households.
The Albanian economy grew by an annual 4.45 percent in the first quarter of this year, an almost decade high quarterly rate, but growth was mainly fuelled by the energy sector which had a 2.4 percentage point contribution to the total growth mainly because of the resumption of electricity exports and rising commodity prices with a positive impact on the country’s oil and mining industry.
“Energy-reliant growth is not testimony to systemic and sustainable growth, but accidental growth fuelled by Mother Nature’s heavy rainfall enabling big and immediate exports differently from last year’s drought. That’s why comparing exports of a dry season to that of a season with tropical rainfall bears no real economic meaning, but unveils accidental growth which in this case is positive for the economy, but momentary,” Guxholli, an economics professor who also heads the energy and natural resources department at the main opposition Democratic Party, says in an op-ed published on a local Albanian portal.
“Likewise, the export growth from the oil and mineral sales following a hike in international prices is also an external factor that is not testimony to real economic growth, but is still accidental growth beyond internal economic developments,” she says.
According to her, the double-digit growth in exports in the first quarter of the year at a time when the national currency considerably strengthened against Europe’s single currency is not good news as it has increased labor and investment costs and reduced profits for exporting companies.
Albania’s national currency currently trades at a 10-year high of 126 lek against Europe’s single currency with a negative effect for the overwhelming majority of Eurozone-destined exports as well as local producers who are facing tougher competition from cheaper imports.
“The same way, the increase in imports fuelled by a stronger lek damages and discourages domestic production which now competes with lower import costs, making it possible for importers to lower prices and increase market shares,” says Guxholli.
Paradoxical growth!
Selami Xhepa, another economy expert, says Albania’s GDP growth in the past three decades of transition to democracy has been paradoxical bringing a small increase to real income and consumption.
“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 told Mapo magazine in an interview.
The Albanian economy has been growing by 1 to 4 percent in the past nine years compared to a pre-crisis decade of 6 percent annually, a growth rate which experts estimate has tangible effect on Albanian households.
Similarly to other EU aspirant economies, GDP per capita and consumption levels in Albania are at only about a third of the EU average.
A recent report by Eurostat, the EU’s statistical office, has shown the GDP per capita, an indicator of economic activity, and the actual individual consumption, a measure of households’ material welfare, have almost remained at a standstill in the past nine years following the 2008-2009 global financial crisis despite Albania being the region’s best economic performer and the only Western Balkan country to escape recession.
“The structure of employment in Albania corresponds to a low value added economic structure which as a result has low productivity. That explains the very low level of wages in the economy especially in agriculture, construction and the garment and footwear industry but even the high seasonality in the tourism sector and the problematic social condition that our society faces today,” says Xhepa.
Albania’s official unemployment rate has dropped to 12.5 percent, but high migration rates in the past few years and more than 40 percent of the population still calculated as self-employed in the agriculture sector contribute to the low jobless rates.
“During its history Albania has had economic growth, but without development and progress in the Western sense of the term which means an economy with modern structures, a high level of technology and social and democratic standards similar to developed countries,” says Xhepa.
According to him, economic growth, even though positive has been slower than what’s needed to narrow the gap with developed countries both in terms of income and other aspects measuring progress. “That’s why the Balkans is still Europe’s backward region and Albania one of the region’s poorest. Some countries such as Montenegro and somehow Macedonia seem to be moving faster and likewise Serbia has a potential for a huger advantage,” says Xhepa.
Albania’s economy grew by an average of 2.8 percent annually in the past four year, but economy experts say GDP growth has been non-inclusive and mainly fuelled by some large-energy related projects and benefitting only a fifth of a population.
GDP per capita in purchasing power standards, an artificial currency unit that eliminates price level differences between countries, was at 29 percent of the EU 28 average in 2017, having almost remained unchanged for the past eight years, according to Eurostat.
Meanwhile, Albania’s actual individual consumption was at 37 percent of the EU average in 2017 having fluctuated at about the same levels for the past six years, but increasing by 9 percentage points compared to a decade earlier just before the onset of the global financial crisis.
“We have to understand that our race is with others and not ourselves. To date, we have only won the race with our past and that is thanks to the system, but we are not winning the race with others and that is our failure,” says Xhepa.
In the early 1990s, when the country’s hardline communist regime collapsed, Albania was the Balkans’ most underdeveloped economy and the low starting point has also contributed to current insufficient progress.
