Albania looks to translate impressive gains into sustained growth
| Author | Geoffrey Oestreicher |
| Position | IMF European Department |
| Pages | 335 |
Page 335
Albania has made impressive progress over the past 15 years. When the country began its transition to a market economy, it had the lowest level of per capita income, trade openness, and market development in Europe. It is still among Europe's poorest countries. But, notwithstanding some setbacks since 1991, the rapid growth engendered by a concerted series of structural reforms and by a strong commitment to macroeconomic stability has more than doubled Albania's per capita income and steadily reduced the income gap with its neighbors.
A wide range of macroeconomic indicators signal progress. Public debt as a percent of GDP is declining, inflationary expectations are firmly grounded at low levels, financial intermediation is rising, confidence is steadily increasing, and in the virtual absence of capital controls, the freely floating exchange rate continues a trend appreciation. With its development strategy designed to contain the size of government and seek private sector-led solutions for all but essential core government functions, Albania's fiscal management has found an effective anchor, and the privatization process for the remaining large government assets is reaching its final phase.
The government's strong policies are chiefly responsible for this success, but the IMF has also played an integral role. The Fund has lent support through most of the transition process-first through its low-income country Poverty Reduction and Growth Facility (PRGF) and, more recently, in view of the rapid rise of incomes, through a blend of PRGF and Extended Fund Facility financing. Equally important, technical assistance-particularly in the monetary and fiscal areas-has been generous, in part reflecting the unusually high degree of implementation.
[ GRAPHICS ARE NOT INCLUDED ]
One measure of Albania's success to date is that the authorities-supported by IMF staff and the Executive Board-now envisage graduating from program status in early 2009 with the expiration of its current financing arrangement with the IMF. The challenge ahead will be not simply to maintain high growth but also to ensure its quality and sustainability over the longer term. With early efficiency gains from transition largely exhausted, more permanent sources of growth will be needed to ensure success and further reduce the income gap with...
To continue reading
Request your trial