Reading between the lines

Usually, the Governor of the Bank of Albania, Adrian Fullani, includes in his statements a sentence reading, “We do not see any concrete risks for the Albanian economy”. The sentence was missing in two of his recent statements. Instead, in another statement, Fullani spoke about risks remaining high for the Albanian economy. In particular, Fullani has warned against the uncontrollable expansion of loans in the domestic markets and the risk of instability in exchange rates. The rapid increase of credit by Albanian banks, and their eagerness to grab market share from each other, has resulted in an increase of bad loans. According to the Bank of Albania, in January 2008 the ratio of bad loans was 3.6 percent compared to just 2.6 percent a year ago. It is estimated that the total value of all bad loans is some Euro 90 million.
The trade deficit is another troublesome event for the Albanian economy. For instance, just during the first quarter of 2008, the trade deficit increased by 17 percent. The increase is mainly due to the jump in the cost of imported goods. A case in point is imported electricity. Last year, Albania imported electricity worth Euro 200 million. Just in the second half of 2008, KESH is planning to buy electricity worth Euro 80 million. The total trade deficit for 2007 reached Euro 2.3 billion, or 26 percent more than in 2006.
Further, the statement makes it clear that the Albanian government is unable to realise its capital investments, according to its own plans. For this year, the government is planning to invest ALL 105 billion. However, for the first quarter, it has realised only ALL 5.18 billion out of ALL 10.8 billion, as was called for. This means that it has realised $7 million less than during the same period, or only 4.9 percent of total investments for the year 2008. (Tirana Times Staff)