Final Report - European Commission - Europa

6
Evaluation of EC Country Strategy: Albania
• infrastructure bottlenecks. The problems in the electricity sector, in particular, are also
likely to both reduce growth and economic activity in the short term, and inhibit
investment in the longer term. It will be very difficult to develop new, export-oriented
sources of growth – for example, in the tourist sector, which has considerable potential –
without radical improvements in the transport, water and sewerage systems.
• financial system. The Albanian financial system at present operates largely as an
intermediary by which the population finances the government deficit: private investment
is almost entirely crowded out. 90% of the assets of the banking system is government
debt. 13 Lending to the private sector is very small, at about 4% of GDP. Again, the
development of the financial sector is inhibited by the non-enforceability of claims
resulting from the problems in the legal system. The IMF and World Bank are pressing
strongly for the privatisation of the Savings Bank, which holds the vast majority of
deposits: however, it is not clear why a change of ownership will in itself improve matters
much. 14
• The dependence of the country on remittance income, which amounts to about 12-15% of
GDP (estimates are uncertain, particularly given the questionable legal status of some of
these funds). Remittance income is potentially quite volatile, and will be affected by the
economic fortunes, and immigration policies, of Western European countries. Moreover,
it appears that most remittance income in Albania is invested in construction, which may
have a distortionary impact on the economy.
13
14
“Albania: First Review under the Third Annual Arrangement under the Poverty Reduction and
Growth Facility”, Staff Report, International Monetary Fund, February 2001.
The National Commercial Bank, which has already been privatised, makes very few loans to
the private sector.