IMF: Impossible to forecast this crisis

TIRANA, 25 Feb 2009 — Albania will be affected by the global economic crisis, but no one knows its extend. The former head of IMF mission to Albania, said yesterday that it is impossible to make a realistic forecast about the future economic growth of the country. According to him, there will be some growth, but it will be accompanied by a large margin of insecurity.
“At first, we forecasted a growth of 6%. In November we lowered our forecast to 3.5% and in a later interview I said that such growth needed to be reviewed conservatively. We don’t know what the data numbers will tell us two or three months from now,” Bell said.
Bell added that economic growth in 2009 will be the slowest yet in the last decade with employment, investments and credit taking the blow, but the country’s economy will remain functional nevertheless.
However, according to Bell, Albania enjoys a more favorable position than its regional neighbors thanks to careful monitoring of the banking system by Bank of Albania.
Bell mentioned domestic currency depreciation as one of the main problems in many countries affected by the crisis.
“We are experiencing this problem in many countries. The risk of home currency depreciation and its effect on the financial system is present in Albania, too. This is not a surprise to us considering that the best part of bank credit is in foreign currencies. In a way or another, Albania has prepared itself for such a risk. Bank of Albania has undertaken a conservative policy by implementing new security conditions regarding crediting and also, most of the borrowers in foreign currency loans receive their incomes in foreign currencies, therefore limiting the risk deriving from Lek depreciation,” Bell said.
In addition, he asked the Albanian government to be more careful with its budget spending, because revenues will decrease. According to Bell, there was no space for lower taxes anymore.
“The contingency fund must not be spent; instead, it should be used to finance the budget in case revenues suffer. There is a huge chance that will happen. Also, revenues from privatization should not be destined for new investments, but it should be used to compensate the budget. The fulfillment of the budget is imperative since this an election year,” Bell concluded.
The contingency fund set by the government is 6 billion ALL (60 million US$, 48 million euro).
This Friday, Albanian Government is expected to evaluate offers from seven international banks for a 300 million euro loan. Officials from the Ministry of Finance declared that such a loan might be used to finance the budget.