What is a strong economy?

In clarifying the term strong economy, according to many definitions and criteria from most information, it is seen that it should summarize together:

– High rate of economic growth. According to our commentary, this implies an expansion of economic output, which will lead to higher average incomes, higher output, and higher spending. Based on the report of the World Bank and similar reports, there remain large reserves for Albania, to consider that such indicators have been met.

– Low and stable inflation (if growth is too high, we may start to see inflation rise). According to our commentary on Albania, it can be said that the inflation level is already lower, but the sustainability of this trend remains doubtful, since September 2023 recorded a slight increase, as well as the end-of-year season, which is associated with price increase for food products and raw materials. Also, based on the entry into force of the law in 2024 for the return of the tax at the rate of 15% on net income[1] for most activities (according to an announcement from the media, the increase occurs for 284 activities) is a reason to predicted that it will affect the increase in the prices of services and their products.

– Increasing interest rates to keep inflation low. According to our comment, the Bank of Albania has not announced any further increase in the base interest rate beyond what is currently applied.

– Low unemployment. According to our comment, the low unemployment level is a positive indicator for labor market statistics, while the high unemployment level among young people remains worrying, which means that the indicator is considered positively with reservations.

– Increase in exports. According to our commentary for Albania, there is a decrease in the level of exports, and this is unlikely to be changed during the last months of 2023.

– Improved productivity (more products/services performed per unit of time per worker). According to our commentary, labor productivity in Albania improved by 0.50% year-on-year in June 2023, compared to a decline of 1.46% in the previous quarter, according to the latest data [2]. This indicator is a sign of improvement, but the increasing level in only one quarter is again a reflection of instability of the economy.

– Increase in investments. According to our comment, the level of public investments for the 9th month of 2023 was as much as 29.2% less than the program. Meanwhile, foreign investments have an increase of 7%[3] is an indicator that reinforces the entry of capital into sectors of the economy, such as: real estate, as well as the energy sector.

– Declining government borrowing. According to our commentary, government borrowing based on the normative act [4] of October 2023 increases the ceiling of government borrowing until the end of 2023.

– High consumer and business confidence. According to our comment, based on the Business and Consumer Confidence Analysis [5], there has been no increase in confidence for both groups.

In further clarification, a strong economy means strong sectors of the economy and an enviable quality of life that would not rely entirely on a corrupt banking system and an unsustainable consumer bubble [6].

[1] The difference between invoiced income and incurred expenses

[2] https://www.ceicdata.com/en/indicator/albania/labour-productivity-growth

[3] https://altax.al/bilanci-i-pagesave-na-tregon-se-ekonomia-performon-dobet-dhe-pse-turizmi-tregon-shenja-rritje/

[4] https://qbz.gov.al/eli/akt-normativ/2023/10/18/5/dad8e920-357b-4eec-adb9-555a154e61f3

[5]https://www.bankofalbania.org/Politika_Monetare/Vrojtimet/Vrojtimi_i_bizneseve_dhe_i_konsumatoreve/Analiza_VBBK_shtator-2023.html

[6] https://www.collinsdictionary.com/dictionary/english/strong-economy