{"id":26223,"date":"2026-05-20T09:06:55","date_gmt":"2026-05-20T07:06:55","guid":{"rendered":"https:\/\/altax.al\/?p=26223"},"modified":"2026-05-20T09:17:20","modified_gmt":"2026-05-20T07:17:20","slug":"public-investment-deficit-and-its-effects-on-the-economy-and-budget","status":"publish","type":"post","link":"https:\/\/altax.al\/en\/public-investment-deficit-and-its-effects-on-the-economy-and-budget\/","title":{"rendered":"Public investment deficit and its effects on the economy and budget"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">Delays in public investments do not stop at the direct cost of the project. They create a negative chain that affects the entire economy. This section explains how the damage from delays is transmitted into the real economy, identifying three main channels: direct, indirect, and fiscal. The analysis is based on data from all four sectors (road infrastructure, water supply and sewerage, drainage\/irrigation, Albanian Development Fund) and the ALTAX report on the MTBP 2027\u20132029.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Direct channels \u2013 Immediate and visible losses<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">These are the effects immediately felt by citizens and businesses:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Higher transport and logistics costs (15\u201335%)<\/strong><br>Road projects such as the Tirana Ring Road, Corridor VIII, or the Arb\u00ebr Road aim to reduce travel time by 40\u201370%. However, due to delays of 2.2\u20133.8 years, these savings are not realized on time. The result is:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Increased fuel costs, driver time, and productivity losses for businesses.<\/li>\n\n\n\n<li>Freight logistics (imports-exports) become 15\u201335% more expensive, increasing final prices for consumers.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">For example, delays in the Tirana Ring Road increase daily travel time for thousands of residents and trucks, adding logistical costs for supermarkets and factories.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Delays in irrigation\/drainage \u2192 agricultural production losses<\/strong><br>Projects under program 04240 (such as the rehabilitation of the Peqin\u2013Kavaj\u00eb canals or the Buna embankments) have an average delay of 1.2\u20132.7 years. This means that thousands of hectares of agricultural land remain without regular irrigation or flood protection.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Annual losses in agricultural production are estimated at 10\u201320% in affected areas.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">For example, delays in canal rehabilitation in the Fier or Divjak\u00eb areas have led to reduced yields of vegetables and grains, increasing dependence on imports and food prices.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Other sector examples<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Water Supply &amp; Sewerage<\/strong><br>Delays in drinking water supply projects in Durr\u00ebs or Vlor\u00eb increase bottled water costs for households and businesses, adding direct expenses for citizens.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>ADF (urban development)<\/strong><br>Delays in the rehabilitation of public squares or coastal promenades (such as in Vlor\u00eb or Divjak\u00eb) reduce direct revenues from seasonal tourism.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Every year of delay in road infrastructure, irrigation, or water supply directly costs businesses and citizens through higher operating expenses.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Indirect channels \u2013 Medium- and long-term losses<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">These effects are more hidden, but more important for economic growth:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Productivity decline (elasticity \u20130.10 to \u20130.15)<\/strong><br>When transport time or access to water\/irrigation is delayed, labor productivity declines.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For example, a 10% reduction in travel time can increase productivity by 1\u20131.5%.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In Albania, average delays of 2.5\u20135 years mean that the expected benefits from projects such as the Arb\u00ebr Road or the Tirana Ring Road are postponed by 4\u20138 years.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For example, delays in Corridor VIII reduce business access from the Elbasan area to the Port of Durr\u00ebs, lowering production and export efficiency.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Loss of access to markets, tourism, and employment<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Coastal and mountain projects (ADF \u2013 Divjak\u00eb, Palas\u00eb\u2013Dh\u00ebrmi, Albanian Alps) face delays of 2.5\u20135 years. This means the tourism season loses its full potential (fewer visitors, lower spending).<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For example, delays in the Vlor\u00eb promenade or the Divjak\u00eb beach area reduce tourist numbers and revenues from hospitality services.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Delayed roads limit workers\u2019 ability to reach employment centers or markets, reducing employment and income.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For example, delays in northern mountain roads (such as the Arb\u00ebr Road) limit the development of agritourism in Valbon\u00eb and Theth.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Delays in drainage\/irrigation limit the development of modern agriculture and agritourism.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For example, delays in irrigation systems in the Fier area reduce vegetable production, affecting the food supply chain.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Delays reduce the long-term potential of the economy by blocking access, innovation, and labor mobility.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Fiscal channels \u2013 Effects on the state budget<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">These are the effects that directly impact public finances:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Increased expenditures without returns + PPP exposure<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Every year of delay brings contract add-ons, material inflation, and additional supervision costs.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Road PPPs (Arb\u00ebr Road, Milot\u2013Morin\u00eb, Orikum\u2013Dukat) create fixed annual payments of ALL 5\u20136 billion (2025\u20132028), regardless of construction progress. This is a predictable but heavy burden on the budget.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The WB Public Finance Review 2025 identifies three additional risk categories:<\/p>\n\n\n\n<ol start=\"1\" class=\"wp-block-list\">\n<li>Implicit government guarantees from PPPs reach 3\u20134% of GDP.<\/li>\n\n\n\n<li>The Vlora TPP presents a contingent liability risk of more than \u20ac100 million in unrecovered investment.<\/li>\n\n\n\n<li>Energy SOEs (KESH, OST, OSHEE) carry off-balance-sheet liabilities not integrated into the central budget.<\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\">The IMF Article IV 2025 recommends an annual Fiscal Risk Statement and full integration of PPPs into the budget.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For example, fixed payments for the Arb\u00ebr Road continue even though some segments are still under construction.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Higher budget deficit + public debt<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Overprogramming of 2.25\u00d7 (MTBP 2027\u20132029) means that far more projects are planned than can realistically be financed.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Delays postpone completion and increase the need for new borrowing or budget revisions, raising both the deficit and public debt stock.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For example, delays in energy projects (such as the Vlora TPP) increase the need for electricity imports, putting pressure on the deficit.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Lost VAT and tax revenues<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Delayed economic activity (tourism, transport, agriculture) generates lower revenues from VAT, corporate income tax, and social contributions.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For example, delays in tourism projects (such as the Divjak\u00eb beach area or the Albanian Alps) reduce revenues from seasonal tourism VAT.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Delays in roads connecting rural areas to markets reduce agricultural product sales, lowering taxes collected from farmers and processors.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Delays create a negative cycle of higher expenditures \u2192 larger deficit \u2192 higher debt \u2192 narrower fiscal space for new investments.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Public investment delays are transmitted through the economy via three interconnected channels:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Direct<\/strong> \u2013 higher operating costs for businesses and citizens (transport, logistics, irrigation).<\/li>\n\n\n\n<li><strong>Indirect<\/strong> \u2013 productivity decline and loss of long-term opportunities (tourism, market access, employment).<\/li>\n\n\n\n<li><strong>Fiscal<\/strong> \u2013 pressure on the budget, deficit, and public debt (PPP obligations, lost VAT).<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">These channels do not operate separately; they form a chain that makes every year of delay far more expensive than what appears in simple budget figures. The cumulative loss reaches hundreds of billions of lek and slows the country\u2019s long-term development.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Public investment delays are not merely a technical or budgetary problem. They have a deep and multidimensional effect on the entire national economy. This section quantifies the real cost of delays for GDP, the state budget, fiscal revenues, and investor confidence. Calculations are based on data from 350\u2013400 projects, ALTAX analysis of the MTBP 2027\u20132029, and internationally validated economic elasticities.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Impact on GDP (Loss in Economic Growth)<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Annual losses are estimated at 0.8\u20131.4% of GDP. The cumulative loss for the period 2020\u20132028 now reaches ALL 159\u2013260 billion, after adjustment using the latest nominal GDP data.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Numerical table of GDP losses<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><td><strong>Year<\/strong><\/td><td><strong>Nominal GDP (ALL bn, approx.)<\/strong><\/td><td><strong>Annual low loss (0.8%)<\/strong><\/td><td><strong>Annual high loss (1.4%)<\/strong><\/td><td><strong>Cumulative loss to date<\/strong><\/td><\/tr><\/thead><tbody><tr><td>2020\u20132024<\/td><td>1,656 \u2013 2,518<\/td><td>13.2 \u2013 20.1<\/td><td>23.2 \u2013 35.3<\/td><td>65 \u2013 95<\/td><\/tr><tr><td>2025*<\/td><td>2,652<\/td><td>21.2<\/td><td>37.1<\/td><td>86 \u2013 132<\/td><\/tr><tr><td>2026<\/td><td>2,838<\/td><td>22.7<\/td><td>39.7<\/td><td>109 \u2013 172<\/td><\/tr><tr><td>2027<\/td><td>3,036<\/td><td>24.3<\/td><td>42.5<\/td><td>133 \u2013 214<\/td><\/tr><tr><td>2028<\/td><td>3,249<\/td><td>26.0<\/td><td>45.5<\/td><td>159 \u2013 260<\/td><\/tr><tr><td>Total<\/td><td>\u2013<\/td><td>\u2013<\/td><td>\u2013<\/td><td>159 \u2013 260<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">* estimate based on IMF and Ministry of Finance projections<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The cumulative loss of ALL 159\u2013260 billion is equivalent to the annual budget of several major ministries or the total capital investment of multiple years. This loss is real and measurable in the form of lower economic growth.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Concrete sectoral examples<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Road infrastructure<\/strong>, where delays in the Tirana Ring Road and Corridor VIII reduce business access, causing a 3\u20135% productivity loss in affected areas.<\/li>\n\n\n\n<li><strong>Water Supply &amp; Sewerage<\/strong>, where delays in Durr\u00ebs and Vlor\u00eb negatively affect public health and urban attractiveness.<\/li>\n\n\n\n<li><strong>Drainage &amp; Irrigation<\/strong>, where delays reduce agricultural yields by 10\u201320% across thousands of hectares.<\/li>\n\n\n\n<li><strong>ADF<\/strong>, where delays in tourism projects reduce tourism revenues by hundreds of millions of euros annually.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Impact on the State Budget<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Numerical table of fiscal exposure<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><td><strong>Element<\/strong><\/td><td><strong>Value (ALL bn)<\/strong><\/td><td><strong>% of GDP (approx.)<\/strong><\/td><td><strong>Note<\/strong><\/td><\/tr><\/thead><tbody><tr><td>Overprogramming (MTBP 2027\u20132029)<\/td><td>9.2<\/td><td>0.35%<\/td><td>Gap between planning and real capacity<\/td><\/tr><tr><td>Annual road PPP payments (2025\u20132028)<\/td><td>5.0 \u2013 5.5<\/td><td>0.19\u20130.21%<\/td><td>Fixed payments regardless of progress<\/td><\/tr><tr><td>Additional annual delay costs<\/td><td>4.0 \u2013 7.0<\/td><td>0.15\u20130.27%<\/td><td>Contract add-ons + inflation<\/td><\/tr><tr><td>Total annual fiscal exposure<\/td><td>18.2 \u2013 21.7<\/td><td>0.69\u20130.83%<\/td><td>High risk for deficit and debt<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">Overprogramming of \u20ac9.2 billion and fixed PPP payments create continuous pressure on the budget. Delays add extra costs that force the government either to borrow more or reduce spending in other priority sectors (education, health).<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Impact on Fiscal Revenues<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Numerical table of fiscal revenue losses<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><td><strong>Revenue source<\/strong><\/td><td><strong>Annual low loss (ALL bn)<\/strong><\/td><td><strong>Annual high loss (ALL bn)<\/strong><\/td><td><strong>Main reason<\/strong><\/td><\/tr><\/thead><tbody><tr><td>VAT<\/td><td>8\u201312<\/td><td>14\u201320<\/td><td>Lower economic activity (tourism, transport, construction)<\/td><\/tr><tr><td>Corporate income tax<\/td><td>3\u20135<\/td><td>6\u20139<\/td><td>Lower business turnover<\/td><\/tr><tr><td>Excise taxes (fuel, etc.)<\/td><td>2\u20134<\/td><td>4\u20137<\/td><td>Lower consumption due to higher costs<\/td><\/tr><tr><td>Total annual loss<\/td><td>13\u201321<\/td><td>24\u201336<\/td><td>\u2013<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">Every year of delay creates a double fiscal loss: higher expenditures + lower revenues. This worsens fiscal balance and increases pressure for new taxes or spending cuts.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Impact on Investments and FDI (Investor Confidence)<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Comparative confidence table<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><td><strong>Indicator<\/strong><\/td><td><strong>Albania<\/strong><\/td><td><strong>Regional average (Balkans)<\/strong><\/td><td><strong>Impact of delays<\/strong><\/td><\/tr><\/thead><tbody><tr><td>Public\/private investment ratio<\/td><td>1 : 0.8<\/td><td>1 : 1.4<\/td><td>Lower private confidence<\/td><\/tr><tr><td>Risk premium for sovereign debt<\/td><td>+1.5\u20132.5%<\/td><td>+0.8\u20131.5%<\/td><td>Increase due to instability<\/td><\/tr><tr><td>FDI as % of GDP (average 2020\u20132024)<\/td><td>6\u20138%<\/td><td>8\u201312%<\/td><td>Lower due to risk perception<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">Systemic delays and overprogramming send a negative signal to investors. The result is a low ratio between private and public investment (1:0.8 versus the regional 1:1.4 average) and a higher risk premium for Albanian sovereign debt.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Major projects such as the Durr\u00ebs\u2013Prishtina Railway or the Vlora TPP, which remain blocked for years, weaken long-term investor confidence.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Regional comparison of macroeconomic impact<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><td><strong>Indicator<\/strong><\/td><td><strong>Albania<\/strong><\/td><td><strong>Western Balkans average<\/strong><\/td><td><strong>Comparison (Albania vs Region)<\/strong><\/td><\/tr><\/thead><tbody><tr><td>Annual GDP loss<\/td><td>0.8\u20131.4%<\/td><td>0.4\u20130.9%<\/td><td>1.5\u20132 times higher<\/td><\/tr><tr><td>Overprogramming (times above capacity)<\/td><td>2.25\u00d7<\/td><td>1.3\u20131.8\u00d7<\/td><td>Significantly higher<\/td><\/tr><tr><td>Cost overruns (average)<\/td><td>28\u201342%<\/td><td>20\u201335%<\/td><td>Higher<\/td><\/tr><tr><td>Public\/private investment ratio<\/td><td>1 : 0.8<\/td><td>1 : 1.2\u20131.4<\/td><td>Worse<\/td><\/tr><tr><td>Risk premium for debt<\/td><td>+1.5\u20132.5%<\/td><td>+0.8\u20131.5%<\/td><td>Higher<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">Albania has one of the most negative impacts from delays in the region, mainly because of extreme overprogramming and high non-advancement rates (73%).<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Countries such as Serbia and North Macedonia have improved after implementing PIM reforms, reducing GDP losses below 1%.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Bosnia and Herzegovina faces problems similar to Albania due to weak institutional coordination.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The macroeconomic and fiscal impact of delays is multidimensional and cumulative:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>GDP<\/strong> with annual losses of 0.8\u20131.4% (ALL 159\u2013260 billion cumulative for 2020\u20132028).<\/li>\n\n\n\n<li><strong>State budget<\/strong> with \u20ac9.2 billion overprogramming + fixed PPP payments + additional costs.<\/li>\n\n\n\n<li><strong>Fiscal revenues<\/strong> with VAT and tax losses of ALL 13\u201336 billion per year.<\/li>\n\n\n\n<li><strong>Investments &amp; FDI<\/strong> with declining confidence and an unfavorable public\/private investment ratio.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">These effects create a negative cycle of delays \u2192 higher costs \u2192 larger deficit \u2192 higher debt \u2192 narrower fiscal space \u2192 fewer effective investments.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Without deep reform, this cycle will continue to slow Albania\u2019s long-term development.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The regional comparison shows that Albania has substantial room for rapid improvement if it follows models such as Georgia\u2019s success or North Macedonia\u2019s reform experience.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Delays in public investments do not stop at the direct cost of the project. They create a negative chain that affects the entire economy. 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