Albania 3.4, Macedonia 4.0, Montenegro 4.1, Kosova 4.0. Even if you understand nothing on fiscal terms, you easily realize that Albania is not ranking high in the region. Data come from the European Commission newest report ’2016 Economic Reform Programs in Western Balkans’ and those are the numbers showing the GDP growth during 2016.

Lack of access to finance, high level of informality, unclear land ownership and an excessive regulatory burden and widespread corruption. Those are the main obstacles, European experts list when speaking about challenges Albania still faces to improve the business climate. ‘Combatting those obstacles requires sustained political commitment and a coordinated approach’ the report stresses.

Albania lags behind the region countries regarding the revenues, expenditures and general government debt.

As fiscal indicators shows Albania in 2018 is expected to have a total revenue of 27.3 % of GDP, compared to Montenegro 39.6, Serbia 39, Bosnia and Herzegovina 36.4 and Macedonia 31.2 leaving behind only Kosova with 24.4.

It is forecasted a decrease of total expenditure in 27.8 % of GDP in 2018 from 32.2 % that was in 2015. The total expenditure in 2008 is expected to be 42.4% of GDP, Turkey 40%, Macedonia 33.8%, Bosnia and Herzegovina 35.3% of the GDP.
Albania scores also high regarding the Government debt, with a 70.7% being in the same level with Montenegro 70.7%, as Serbia is ranked first with 79.1%.

According to the Report ‘Policy plans of Serbia and Albania, which have the highest level of public debt in the region, envisage an ambitious expenditure-led fiscal consolidation, but underlying measures could be more specific while fiscal risks, stemming in particular from the pace of reform implementation and from contingent liabilities, persist.’

Agriculture sector  - the challenges

Unresolved land ownership issues, inaccurate or overlapping boundaries between properties, high transaction costs in selling and buying property, absent or not-functioning registers. European commissioners seem unhappy with the issues that are still persistent regards agriculture growth in Albania, stressing that ‘Informality is widespread in this sector, safety and quality standards are not enforced, and capital investments are insufficient.’

‘The measure to consolidate and defragment agricultural land should allow farmers to make use of economies of scale. The timeline, costs, budgetary impact and expected impact on competitiveness are all well described in the Economic Reform Program, although doubts may be raised about the level of ambition and insufficiency of funds. Property and land consolidation will require time. Consequently, in 2016-2018 it may be more feasible to concentrate on solving property rights issues, completing the legislative framework, and starting work on the electronic country-wide cadaster’ the report states.

Agriculture has a significant potential in all the countries of the region. However, land fragmentation, unclear property rights and underdeveloped irrigation systems remain significant barriers. The use of outdated technologies lowers the productivity of the sector in the whole region. In all these countries, the level of public and private sector investment in research, development and innovation is very low and far below the level needed to enable the economies to move up the ladder of the value chains.

EBRD: Albania and Western Balkan countries aspire to membership of the European Union, but they face a major convergence challenge in terms of living standards. Photo: WebLibrary

Economies in the Western Balkan - The agriculture’s vital role

‘Western Balkan countries aspire to membership of the European Union, but they face a major convergence challenge in terms of living standards. The vital requirement for catching up with the rest of the European Union is a boost to investment in the region. The Western Balkans has a number of attractive features for investors.’

A 2016 EBRD working paper examines how the Western Balkans can close this gap in the coming years by highlighting the scale of the challenge, the advantages of the region for investors and the likely growth drivers, as well as the challenges and risks.

According to the document, ‘In general, the region is quite agriculture-intensive, and agriculture (together with forestry and fishing) accounts for 12 per cent of value added on average, ranging from only 7 per cent in Bosnia and Herzegovina to 23 per cent in Albania. Agriculture plays a vital role in the Western Balkans, both socially and in terms of employment. This contrasts significantly with the central and Eastern European EU countries where on average the sector accounts for only 4 per cent of economies.

The document underline the importance of tourism stressing that ‘Several countries have strong potential for further growth in the tourism sector. In 2013, receipts from international tourists amounted to 21 per cent of GDP in Montenegro and 13 per cent of GDP in Albania. Both countries, as well as others in the region, expect tourism numbers to increase significantly in the coming years, especially as the quality of infrastructure and services improves towards the standards of the most advanced western markets.’

Informal activities are pervasive in Albania and other Western Balkans countries, holding back the development of legitimate businesses, depressing tax revenues and hindering labor protection, the EBRD working paper notice. In September 2015 the Albanian government initiated a high-profile campaign to tackle informality. The program is at an early stage but has already yielded some results. Informality and widespread corruption still remain the main obstacles for the Albanian economy emphasized in each EU and international economic report.

The European Union has been frank enough on the regards of the justice reform, making it clear that corruption is the worst problem that affects the Albanian economy. And the bottom line is, fight corruption to save the economy./