By ANDI BALLA
For the past few months Albania’s economy has been a tale of two cities. If you listen to the government, the country is a bastion of economic growth and progress — a beacon of economic freedom shining over a continent in recession. The opposition tells a different story. Albanians are living in an economically depressed place, it says. And the economy is out of control because of the government’s incompetence in spending, debt and taxation.
The truth is somewhere in the middle. Albania’s economic performance is good in terms of growth when compared with the rest of the region and Europe at large. The government’s reforms have been contusive to a better economic climate. However, it is all relative and economic growth is not the only indicator in economic well-being. Prices are up, and, as a result, incomes have shrunk in Albania. There is less money coming in from emigrants abroad and sectors like construction have taken a nose dive. That has led to higher unemployment and people’s quality of life has taken a hit.
And because politics are so intertwined in the country’s economic life, depending on which side any particular Albanian might stand, the perceived economic reality of half the population might indeed not be the same faced by the other half.
However, perceptions aside, the vitriolic and atavistic nature of recent political debate in Albania, is now affecting the economy directly.
Political uncertainty was one of the negative factors, Standard & Poor’s, the rating agency, listed in giving Albania a B+ sovereign credit rating last week. If B+ sounds decent on a test, in terms ratings it means Albania’s credit history is junk – high risk.
The rating agency did note that Albania’s EU membership prospects offer a stable outlook for its rating. But that EU prospect itself risks slowing down to a grind if the political crisis persists, according to this week’s integration coverage on Tirana Times.
S&P also noted that Albanian public finances are characterized by consistently high government debt, despite strong economic growth. According to an article in this week’s Tirana Times business section, the debt / GDP ratio of Albania is among the highest in the countries S&P rates.
And the government wants to borrow more. Looking to raise at least 300 million euros, Albania will be selling its first bonds in a foreign currency to finance budget shortfalls in 2010. The government is also selling treasury bonds domestically at record rates.
All this is not abnormal, and not necessarily bad. But it needs to be met by a strong growing economy and growing tax base, something that cannot be guaranteed for the immediate future due to a series of external and internal factors, including political instability.
More importantly, using economic arguments to win economic fights can only go so far. Once the political argument, instead of the economy, becomes the news story, no one wins — and the whole country suffers.
