{"id":23896,"date":"2025-11-13T08:12:57","date_gmt":"2025-11-13T07:12:57","guid":{"rendered":"https:\/\/altax.al\/?p=23896"},"modified":"2025-11-11T08:19:27","modified_gmt":"2025-11-11T07:19:27","slug":"the-need-for-a-more-realistic-budget-report-based-on-in-depth-economic-analysis","status":"publish","type":"post","link":"https:\/\/altax.al\/en\/the-need-for-a-more-realistic-budget-report-based-on-in-depth-economic-analysis\/","title":{"rendered":"The need for a more realistic Budget Report, based on in-depth economic analysis"},"content":{"rendered":"\n

The Albanian Economy, as Presented in the Draft Budget Report for 2026<\/a>,<\/strong> is depicted as a story of sustained success in the face of multiple crises over the past decade from the 2019 earthquake and the global pandemic to inflationary and geopolitical shocks.<\/p>\n\n\n\n

The dominant narrative emphasizes macroeconomic stability<\/strong>, supported by \u201cprudent fiscal and monetary policies\u201d<\/em> and \u201ca continuous increase in domestic demand.\u201d<\/em><\/p>\n\n\n\n

However, a realistic assessment<\/strong> of this depiction requires examining several dimensions that the text downplays, such as the structure of growth<\/strong>, the quality of investment<\/strong>, the sources of consumption<\/strong>, the role of the exchange rate<\/strong>, and the long-term sustainability<\/strong> of this trajectory.<\/p>\n\n\n\n

1. Economic Growth and Its Sources<\/strong><\/p>\n\n\n\n

The 2024\u20132025 budget report presents a real growth projection of 3.6\u20134.0%<\/strong>, consistent with INSTAT and Bank of Albania data. Yet, a deeper analysis shows that this growth is mainly driven by domestic demand<\/strong>, particularly household consumption and public investment. This structure reflects a fragile growth model<\/strong>, one not yet anchored in stronger productive sectors, innovation, or expanded goods exports leaving the economy exposed to seasonal and external shocks.<\/p>\n\n\n\n

Although service exports, especially tourism, have increased, manufacturing and agriculture have contributed negatively<\/strong> to GDP, revealing a structural imbalance<\/strong> that undermines medium-term sustainability. Moreover, the 13% increase in public consumption<\/strong> highlights the government\u2019s intensified role in maintaining growth momentum suggesting that part of this growth is politically induced rather than productivity-based<\/strong>.<\/p>\n\n\n\n

In essence, despite positive GDP figures, growth remains quantitative rather than qualitative<\/strong>. It does not yet reflect an expansion of productive capacities or a structural transformation of the economy. The Albanian economy thus remains dependent on external factors and fiscal stimulus<\/strong>, posing a challenge for budgetary policies that must balance short-term stability with medium-term resilience and the development of a genuine productive base.<\/p>\n\n\n\n

2. External Trade and the Exchange Rate<\/strong><\/p>\n\n\n\n

The report highlights a narrowing trade deficit<\/strong> and an improved export-to-import coverage ratio (45.4%). However, this improvement does not reflect a genuine strengthening of export capacity, but rather stems from two external and temporary factors<\/strong> reduced imports and the appreciation of the Lek.<\/p>\n\n\n\n

The average Euro\/Lek exchange rate fell from 101.5 to 98.2<\/strong>, which helped contain inflation but simultaneously hurt export competitiveness<\/strong>, especially for low-margin manufacturing sectors.<\/p>\n\n\n\n

This indicates that the improvement in the external balance is monetary and temporary<\/strong>, not the result of stronger export capacity or industrial expansion. If the exchange rate corrects or foreign inflows decline, the current positive effect could quickly reverse, posing risks for the productive sector, future trade balances, and overall economic stability.<\/p>\n\n\n\n

For policymakers, this underscores the need for long-term strategies to enhance real competitiveness<\/strong>, diversify exports<\/strong>, and support sectors with sustainable contribution potential<\/strong>, rather than relying on short-lived monetary effects.<\/p>\n\n\n\n

3. Foreign Direct Investment and Its Structure<\/strong><\/p>\n\n\n\n

Data for 2025 show a slight increase in Foreign Direct Investment (FDI) of +1.1%<\/strong>, but the composition remains deeply non-productive<\/strong>, concentrated in sectors with low multiplier effects<\/strong>:<\/p>\n\n\n\n