Various studies of ours and of foreign experts note that in today’s conditions, the effects of the crisis can be reduced only if the government’s fiscal policies promote domestic production and simultaneously financially support the social classes and groups in need.
For a number of objective and subjective reasons, developments in our national economy in the near future will be significantly conditioned by the government’s economic and fiscal policies, as well as by developments in international markets, especially in EU countries. Albania has a small, non-competitive economy, apparently controlled by a handful of oligarchs and with government policies dominated by propaganda and mediocrity. Regardless of the equal balance of internal and external factors that determine the pace of this development, the economic, fiscal and monetary policies of the government and the central bank take on a greater importance than usual or in calmer economic situations.
What stands out among the features of our economy this year, but is likely to continue next year, is the unusual increase in inflation. This growth started in the second half of 2021, but almost nothing has been done by the government to curb this erosive phenomenon for family income and savings and the instigator of deepening social polarization. There were and are all opportunities to promote the expansion of the areas planted with agricultural crops and to increase the number of heads in livestock. But for these, the relevant agrarian policies are missing. Reports from reliable sources speak of increasing poverty in the country. More than 90 thousand people are in conditions of extreme poverty. Almost half of the citizens employed in the private sector receive wages up to the lower limit of the labor wage allowed by law (minimum wage). This number is easily expected to increase in the coming months. Moreover, reporting on unemployment and poverty excludes the rural population. The condition of a part of which tends to deteriorate further. Government programs to support families in need have been limited in time and modest in size, so much so that they do not even cover the effects of inflation in the first half of the following year.
Among the sectors most affected by the current crisis is the energy sector. Paradoxically, the head of the government Mr. Rama warned the energy crisis in the last quarter of 2021. But apart from some controversial concession contracts for favoritism in this sector, the Albanian government has not undertaken any support measures, such as the revision of the tax structure to facilitate consumers, the promotion of the improvement of public transport, the promotion of energy production from alternative sources , etc. Furthermore, the final liquidation of the oil processing in the country (the former ARMO company) and the scrapping of its refinery, as well as the creation of the so-called “transparency boards”, proves the government’s lack of vision and use of the current economic crisis as a means to increase revenues in the state budget, further impoverishing citizens. Meanwhile, the liberalization of the energy supply of a number of businesses by taking them out of the band with a regulated price has encouraged the increase in the price of energy for these businesses and therefore also the goods and services related to them under a cascade effect. The government has also announced several public tenders in the energy sector, for example for renting some floating thermal power plants. But according to environmental experts, they will be accompanied by a high price per unit of energy production and an increase in environmental pollution in the coastal area of the south. The Albanian economy is widely exposed to the world economic crisis and continues to show serious structural problems. In these circumstances, various estimates speak of a slowdown in economic growth during 2023 as well as a relative narrowing of consumption by the population and businesses.
Even some economic and fiscal policies of the government, which, although they seem to ease the impact of the current crisis on the Albanian economy, are estimated to further aggravate the crisis. Such are the so-called “fiscal and asset amnesty” and “legalization of cannabis for medical purposes”. From a macro-economic point of view, these two government policies, even though the Assembly of Albania has not passed them as laws yet, are expected to further deteriorate the business climate in the country, making the country even less attractive for foreign direct investments, exasperating the government’s relations with international institutions, but also encouraging the cultivation of criminal cannabis and the occupation of agricultural land with the “plant of death” and the many problems that accompany this business.
Various studies of ours and of foreign experts note that in today’s conditions, the effects of the crisis can be reduced only if the government’s fiscal policies promote domestic production and simultaneously financially support the social classes and groups in need. Similarly, monetary policies can and should aim at maintaining the balance between consumers and clients of the banking system, with the aim of promoting lending to the real economy, as the surest way to stimulate the economy to get out of the crisis.
Zef Preci is the Executive Director of the Albanian Center for Economic Research (ACER, founded in 1992)