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New economic model for Albania
A need for qualified human capital and technology infrastructure The time has come for education and training of the workforce to be placed on the country's top priority list. Also, the strong economic growth model in the long run requires special attention in further improving of the "traditional" infrastructure, as well as the information and communication technology infrastructure. development of countries in our region, remains generally satisfactory, despite the sluggish economic growth in Eurozone. However, shaky economic activity in the Eurozone, and beyond, may dampen enthusiasm for greenfield foreign investments in the future. Attracting foreign investment and future economic growth
Prof.Dr. Luljeta MINXHOZI First Deputy Governor BANK OF ALBANIA1
T
he slowdown of the world economy and its effects on the Eurozone, as well as in the Balkan region, have had significant impact on the Albanian economy as well, thus bringing to the light discussions about the economic growth model. Although Albania has experienced increasing GDP growth rates, for almost a decade during recent years, cyclical growth puts the Albanian economy in front of new dynamics, by facing situations with more moderate economic growth rates. Economic reports show that, foreign investment, a very important lever for economic 1
The greatest constraints for a further growth of the Albanian economy appear to be due to the scarcity of human capital and the lack of more sophisticated infrastructure. Expectations for a significant demographic decrease in the not-too-distant future raise many questions about growth opportunities.
will depend on the economies’ ability to reduce the gap created in this regard. Therefore, prioritizing "complementary factors of production" is deemed as necessary, to support rapid economic growth.
Estimates for the the Albanian economy in coming years suggest that economic activity will continue to be supported by an expanding domestic demand, in particular by the increase of private consumption and private investments. Such tendency is quite similar to the economic behavior of other countries in the region, which also support their economic growth in increasing consumer spending and investments. The main characteristic of the Albanian economy dynamics is that, it is operating under conditions of low inflation, which is caused by both the insufficient inflationary pressures of domestic sectors and the weakness of imported inflation, as well. Financial Developments Contrary to moderate dynamics of the real sector, the financial markets in Albania have been calm and have witnessed low risk premiums. The low costs of bank financing, as well as an increased competition in the banking market, have created very positive conditions for further decline in loan interest rates, both for businesses and households. Under these conditions, positive developments
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy, or position of Bank of Albania.
January 2020
Bankieri
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