Albania’s rising price woes are set to continue until at least the end of the year, according to Genc Sejko, the Governor of the Bank of Albania in a press conference on Tuesday (5 April).
Presenting the transition report from the European Bank for Reconstruction and Development on the challenges facing economies in the region, he said Albania will face additional costs impacting both consumers and businesses.
“The attack on Ukraine and sanctions imposed on Russia have led to a massive increase in the price of food, oil, products and energy. Uncertainty remains great, but the information provided suggests that these prices will remain high at least until the end of the year,” he said.
Despite increases in inflation and costs, the volume of economic activity in the country is also set to increase.
The transition report noted that the economy has started to recover in 2021, from the shock of the 2019 earthquake followed by the COVID-19 pandemic. The GDP rose by almost 18% in the second quarter of 2021, driven by a recovery in domestic and external demand.
Other positive developments highlighted by the report include a large-scale overhaul of the railway network, starting with the link between Tirana and Durres. It also noted a new law on climate change including a pledge to reduce emissions by 20.9% with the aim of reaching zero by 2050.
Albanian Government Announces it will Cut Emissions by 20.9%
Priorities for the year ahead include strong fiscal reforms to ensure the sustainability of long-term public debt. But this should also include targeted support for those left reeling from the pandemic. Particular attention should be paid to the fiscal risks from public-private partnerships.
Additionally, the business environment also needs improving through the simplification of the tax system, strengthening public administration and fighting corruption. This should lead to a reduction in informality and a level playing field for businesses.
Government Announces Public Debt Surpasses 80.1%, Not Including Dozens of PPPs
Not mentioned in the report is the extremely high level of public debt. In early 2022, the government announced it was at 80.1% of the GDP, the highest since the fall of communism. However, the real figure is much higher as the government does not include PPPs, bills and arrears for services received, and penalties in international tribunals.
If we add this to the liabilities from official debt and concessions, we reach a total of EUR 10.98 billion, almost EUR 11 billion- 86% of the GDP in 2020 which would have risen again up to the current day.
Over the past year, the government has increased public debt at faster rates than the country’s economic growth. Albanians’ per capita income has grown at lower rates than per capita debt, spelling trouble for the future.
