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Editorial: Albania’s economic management is failing its people
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- The country has moved backward in economic wellbeing indicators since 2016, compared to the region.
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TIRANA TIMES EDITORIAL
In what has become an annual grim ritual, the focus is back this week on Albania’s GDP per capita and the purchasing power of its citizens.
The result remains the same it has been for years: Albania is the worst performer in Europe outside the former Soviet Union. But what is worrying in the data this year is that Albania is now falling further behind when compared to the Western Balkans region, itself the worst performer in Europe.
Albania saw Europe’s lowest per capita income during 2020, the pandemic year, according to Eurostat data. And with income that was 30 percent the size of the European Union average, Albanians had 39 percent of EU’s individual per capita consumption. These indicators are key to economic wellbeing.
Eurostat adjusts its consumption data for purchasing power, and still Albania is dead last, meaning costs of living are high, while wages remain low.
Looking at wage data, Eurostat’s domestic counterpart, Instat, confirms the wage gap with data from 2021. The average wage in the country has risen compared to a year ago, which was also the peak of the pandemic, but is showing a downward trend this year, at a time when citizens are facing a drastic rise in prices of everything from food to homes.
According to Instat data, in the third quarter of 2021, an Albanian employee was paid an average of 467 euros per month, with private sector employees average wages being lower, 424 euros, and in the public sector they were higher, 558 euros. All those numbers are lower than any other country in the region, including Kosovo. They are almost half of those in neighboring Montenegro.
The results are clear for all to see. A lower standard of living, a lower tax base -- and massive out-migration of the most productive part of the workforce, leading to a downward economic spiral.
Yet, these important indicators seem to just be accepted as a way of life by Albania’s government, as if its management of the economy has nothing to do with this outcome.
In fact, the very actions of the government are part of the problem. It has focused its funding on grandiose infrastructure projects, typically of the public private variety, channeling taxpayers funding to a few large companies while burying small and medium enterprises in paperwork and legislation. With the pandemic boot now on the throat of all businesses, it doesn’t take much to tip the tables. Thousands are closing up shop or tightening their belts -- actions that don’t bode well for economic wellbeing and out-migration.
Moreover, organic foreign investment is missing completely, and the very few major investments that do come in, do so through direct actions by political leaders. Experts say the absence of organic foreign investment is due Albania's tax code and business climate being unfriendly to foreign investors. Without the entry into the market of foreign companies, the wages of local workers will continue to remain uncompetitive, leading to further erosion of economic wellbeing and resulting migration.
Reputable domestic indicators, like the one published by the American Chamber of Commerce in Albania show the same thing over the past five years. No improvement at best, deteriorating circumstances at worst. Local businesses are worried about things the state is supposed to help with: unfair competition, shifting legislation and arbitrary enforcement -- as well as the perineal corruption issue.
There are no easy fixes, but to ignore this vital problem altogether as most political leaders have done this week, it means those trusted with the economic management of the country are failing its people.
