Debt, economic trap

“The recent crisis proved the instability of the growing models that are based in the domestic demand and debt”, Fullani declared.

The high demand for consume was the main source of Albania’s economic growth in the recent 20 years. But according to the Bank, this demand was not supported by the growth of domestic production. Instead, it was financed by the incoming flux of foreign currency, in the form of remittances or debts. The government said in the scientific conference organized by the Bank at the Oxford University that this method is proving to be very difficult today.

“While the IDA model was based in the support of payment balances, grants and soft loans, the future model of the region for the convergence is the model of the market”, Fullani declared.

Even the Minister of Finances, Ridvan Bode, admitted that the economic conditions have changed.

“After the crisis, we are now in another economic world. Many economic actors are expecting the return of the conditions that were before the crisis, in order to live once again in that flow of liquidity, in order to have easier regional and domestic competition. Instead of waiting those times to come back, they must start working to adopt in this new post-crisis economic world”, Bode added.

Bank of Albania has been trying to orient the economy towards a new profile, based mostly on exports than on domestic demand.

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