The Albanian Economy, the difficulties in 2019 and the challenges for 2020

The Albanian Economy, the difficulties in 2019 and the challenges for 2020
 The Albanian economy has seen a significant slowdown in 2019, with more Albanians leaving the country and fewer returning. A troubled year, with increased pressures and halved economic growth, hit hard not only by the earthquake and the energy but also by other domestic factors.

The political crisis that is not being resolved has penalized the performance of the country's economy, turning into a deterrent for many sectors. With the Albanian economy unable to escape seasonal impacts, international financial institutions such as the World Bank and the International Monetary Fund revised downward the forecast for economic growth to 2.9 and 3%, respectively, which forced the government to lower the forecast to 3.9 %, up from 4.3% planned at the beginning of the year.

In addition to internal pressures, the country was also characterized by natural disasters this year. The 21 September earthquake, which seems to have passed with slight damage, was followed by that of 26 November, with loss of life and heavy damage, for which, although more than a month has passed, there is still no receipt and a final balance.

For economic experts, more than natural, it was a state disaster that affected two of the country's main economic development engines: Tirana and Durres, as well as small towns like Shijak, Vora, and Thumana. As for the impact this will have on the economy, experts say the negative effects will extend over the medium term for 3 to 5 years.

The devastating aftermath of the November 26 earthquake forced the government to declare a state of emergency in three regions of the country: Tirana, Durres, and Lezha forcing it to pay 100% for all damages caused. The Reconstruction Program will start implementation from January 1, with the Ministry of Finance allocating an initial fund of ALL 13 billion from the 2020 budget review, which together with donor funding does not exceed ALL 20 billion. But experts say the financial bill is estimated to be higher.

As planned, the government will launch the international markets with a new Eurobond of 500m euros, exploiting low-interest rates. The executive is expected to use this instrument for reconstruction, where it has also planned to obtain loans from two international financial institutions, the International Monetary Fund and the World Bank. This is viewed with great skepticism by economics experts, as they say, it would inevitably increase public debt.

Public debt is not seen as the only concern for the Albanian economy. As the Public-Private Partnership concession contracts have become 'the cancer' of the public finance, the consequences of which will be at the expense of the citizens, the Government has created a new instrument, the Albanian Investment Corporation, which aims to develop state-owned properties.

But the initiative has sparked strong debate among experts arguing that it creates new fiscal risks. For them, the corporation is simply a new concession contract that will create monopolies.

2019 started and ended without any new foreign investment. Major projects, the TAP pipeline and the Devoll cascade that have maintained high levels of foreign direct investment are coming to an end.

As no other investment appears on the horizon, experts raise the alarm about the immediate replacement of these projects. According to them, problems with property issues, which could not be resolved this year, are preventing foreign companies from penetrating in Albania. They propose a major investment in education, as the basic sector that should receive increased attention from the government.

The law on online billing, otherwise known as 'fiscalization', will also come into force in 2020. The most important draft of the fiscal package, which is due to take effect on September 1, has undergone occasional changes due to uncertainties and insufficient time for businesses to implement it. Experts estimate that the process will be associated with high costs for entrepreneurship and further increase informality.

Some countries in the region, along with Albania, have come up with the idea of ​​creating a free economic zone, christened the Balkan Schengen. The deal has been heavily contested by local companies, but also by experts.

In terms of the creation of a common economic zone, Albanian exports this year have seen a sharp contraction. The biggest hit was the electricity, due to the lack of rainfall, and the Fason sector, which employs about 80,000 people across the country. The massive emigration of Albanians was the strongest blow to the Albanian economy this year. The prolonged political crisis but also the uncertainties have returned the fear and the Albanians' desire to leave the country. Official figures show that about 40 thousand citizens sought asylum abroad for a better life.
The Albanian Economy, the difficulties in 2019 and the challenges for 2020 The Albanian Economy, the difficulties in 2019 and the challenges for 2020 Thursday, January 02, 2020 Rating: 5
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