IMF-Albania And Economic Gloom

Tirana, March 03 – Albania was listed among 26 other countries, mainly from Africa, as one of the most vulnerable countries to the global economic crisis. The list was part of an IMF report made public by IMF Managing Director Dominique Strauss-Kahn.
“I foresee mounting problems for developing countries,” Strauss-Kahn said, referring to a “third wave” of the crisis or the transmission of it from financial sectors to the real economy.
The report identifies the main factors affecting economies in poor countries such as dropping immigrant remittances, fall in foreign direct investments, shrinking foreign trade, declining commodity prices and general shrinkage in public revenues.
IMF experts evaluate that in order to cope with the most extreme crisis impact, poor countries will need financial assistance up to $US 25 billion. According to IMF, rich countries should contribute to this fund which will be distributed to countries in need as soft loans.
Last year Albania’s average income moved from poverty level to middle income level therefore it could not qualify anymore for soft loans provided by international insitutions such as WB and IMF. This was an achievement attributed to the country’s economic progress and high growth. However, the current global crisis might just return Albania back to poverty levels.
Regarding Albania, IMF report concludes that immigrant remittances will drop 20% compared to 2008, or a drop of 2% in terms of GDP. Economic aid received by Albania will amount to 2.2% of GDP compared to 2.7% in 2008. A big risk in the banking sector, whose capital is 90% foreign, remains the possibility of funds being transferred from branches to the mother bank in their home countries.
“By taking into consideration that most banks in developing countries are usually owned by foreign banks, they could face transfer of funds toward mother banks,” the report stated.
IMF advised poor countries to be careful with their fiscal policy and allocate their public spending toward parts of populations most affected by the crisis. The Fund insists the economic plans to stimulate economies should assist exports, an important sector for the financing of a country’s economy.
Crisis factors evidenced in the report are already showing in the Albanian economy. Current data shows that foreign trade in January 2009 has shrunk 10% compared to a year ago.
However, Albanian financial authorities stay positive regarding Albania’s economic prospects in 2009. They insist that Albania will be affected by the crisis only superficially and that GDP growth in 2009 will be close to 6%, same as in 2008. During the last months, IMF has continually lowered its prediction of Albania’s GDP growth from an initial 6% all the way to 2.5%.
Despite the report, IMF’s stance regarding Albania and the global crisis is that there are no clear indicators to measure the impact in time and depth of the crisis.