1. Albanian Economy in the Global Economic Background
Altin Tanku
May 18th 2012

2. Overview Current Developments Future in a Global World
Taking stock of current global developments
Economy
Financial system
Future in a Global World
Own Model of growth
The role of Partners

3. Catching up at any speed
GDP per Capita
Source World Bank & UNCTAD

4. Inflation
Foreign price developments the most likely determinant of inflation

5. GDP Growth
Growth depends on consumption, investments and recently exports.
Investment depend on government exp. and credit to private sector.

6. GDP sectors

7. Dynamic Economic Forecasts

8. Policy & Market Interest Rates
Policy is constrained by the presence of output gap and low GDP and low inflation (no strong demand yet in horizon)

9. Fiscal Developments
Fiscal stance is stretched as much as it can, there is less or no room for further fiscal expansion.

10. Foreign Trade Developments
Export growth during represent mainly exports of energy.

11. Current Account 11

12. The other “Export”
Source EUROSTAT & UNCTAD

13. Foreign Direct Investments

14. Exports

15. Imports

16. Free floating exchange rates

17. Banking System

18. Financial Intermediation

19. Sources of Financial Intermediation

20. Non Performing Loans

22. Albania-EU-Global Economy
Albania model of growth
Internal Market Factors
Factor redistribution
early transition period
Absorption lead model
period leading to the crisis
Export lead strategies
Cheap labor?
Lots of FDI exclusively from EU?
“Close” partners in geography and other dimensions?
New relatively large markets?
Moving up the value chain?

23. Global trends & Theory of International Trade
“Over the past three decades hundred of millions of workers have entered the global economy… and over time they have generally gained in terms of human capital and in terms of value added and income. … but these new workers have brought more employment competition and significant shifts in relative wages and prices, which is having profound distributional effects.”
Spence, M., 2011

24. Albania-EU-Global Economy
One global market, one global factor, one global price.
Deal with it …but how …
Challenge: remain part of the global market.
Reduce dependence on single traditional partners
Hope that the anchor is still there
Define relevance of the SEE term
Must know for the future
Understand the nature and value of wealth
It is all part of an endogenous system
There is potential for regime change

25. Global Economy & Albania
The wealthiest “nation” is the “leading anchor”
What will define wealth in the next 50 years
Potential for growth
minerals, agriculture, trade related services and infrastructure
It is all part of an endogenous system
EU developments can not go unnoticed in the global economy.
Global developments can not be treated as exogenous and unrelated with developments of Albania and/or its main partner.
There is potential for regime change
Literature on the negative effects of globalization is growing in size and topics.
Globalization or technological change or both have constrained driving forces of the system opening gaps that might tiger error correcting mechanisms.
Structural breaks vs. temporary drifting
Where is the error correcting mechanism located in the system.