For several times in the last decade, Prime Minister Edi Rama is trying to create a public euphoria over a great discovery, which, despite his frequent warnings, fails to appear to us. A few days ago, Rama repeated once again what he had said in July last year and on other occasions, that oil will be produced in Shpirag and that this discovery will make the Albanians, according to his words, rich enough to create a reserve fund for future generations, in addition to using some of this money to solve the pension crisis.
In a not very convincing way, he even went to the place where the Shell company is drilling, declaring the visit an “inspection”, although it is not understood on what powers the prime minister was carrying out this “inspection”. According to Minister Balluku, “from the moment we started work on establishing a sovereign fund, it means that it is not an income of 500 million euros per year which goes directly to the state budget to cover the needs, but there is talk of much more income high that cannot be managed from the state budget but from the sovereign fund as happened with oil in Norway, Saudi Arabia, Azerbaijan.” Although the author of these lines is not able to understand what exactly the minister is saying in this sentence, I have to interpret it with the suggestion that the government expects 500 million euros of revenue per year to put into the state budget and “much more higher” than that to put in a sovereign fund. So, let’s assume that, in addition to the 500 million for the state budget, it is also about another 1 billion or 2 billion for the sovereign fund. And leaving aside the fact that in this case, the fish is not exactly in the sea, but in the depths of the earth, we have to say that even 2 billion euros a year from the discovery of oil is not something that makes Albania a developed country, it does not even come close to the economic level of Bulgaria or Romania, countries at the lowest economic level among EU member states.
Albania’s gross domestic product this year is expected to reach 2.19 trillion ALL, according to data from the International Monetary Fund. This is a figure equal to 19.9 billion euros, according to the current exchange rate. If Shpiragu performs the miracle announced by Rama and Balluku, the 2 billion that we are assuming will come, will increase Albania’s GDP by 10 percent. The Gross Domestic Product per capita will increase in this way, from the expected 766,000 Lek this year, to 842,000 Lek or 7,660 euros. Meanwhile, Bulgaria has GDP per capita at the level of 14,000 euros, Romania 17,000 or Hungary, 18,000. The 2 billion additional revenues from oil will not make Albania as rich as Serbia, whose citizens enjoy a GDP per capita of 10,000 euros per year. In a word, for Albania to reach the economic level of Serbia, it will have to discover three or four spiragas, while to reach the level of Romania, it will have to discover ten or fifteen such. Even less, there is no chance that such miracles will make us as rich as the European Union, whose GDP per capita is currently 45,000 euros per year.
On the other hand, although Shpiragu is not enough for us to reach the economic level of the poorest EU countries, there is a path that, within a few decades, will make us European citizens, not only politically, but also economically.
The economic growth potential of Albania in real terms is estimated by the International Monetary Fund at 4.5% per year, while in nominal terms, at 7.5% per year. This means that, through good governance, the Gross Domestic Product of Albania will increase, from the current 19.9 billion euros, to 21.4 billion euros in the first year, to 23 billion in the second year, to 24.7 billion in the third year , and so on. In short, the potential economic growth, which can be realized, according to the IMF’s assessment, gives Albanians more additional income each year than any major oil or gas discovery can provide.
The International Monetary Fund assesses economic growth potential using the most specialized economic exercises possible. Potential means production that can be realized with maximum efficiency. In short, if you have the right government, the Albanian economy can grow at this rate. But if you have bad governance, then the economic growth is either lower than that, or higher than that. When it is lower, it means that misgovernance is suffocating the economy through corruption, through unnecessary bureaucratic obstacles or through wrong policies. When the growth is higher than the potential, then it is likely that it is fueled by the speculative growth of the debt, and again, it is bad because it is followed by a crisis after a certain period.
Albania has actually experienced both forms of misgovernance. In 2006-2008, the government increased debts and made them concrete before falling into crisis, while after 2013, the government has not only increased debts, but its spending has been so inefficient that the gross domestic product has grown very slowly. . According to IMF data, Albania’s nominal economic growth between 2014 and 2023 was 5%. This is 2.5 percent less per year. But if we take into account that the growth is progressive, then we must say that, if the government had realized the potential economic growth, then Albania’s GDP would be a few percent higher than it is today.
I am giving a short example of why misgovernance or open corruption are what prevent Albania from discovering its potential in the way that the developed world has discovered, that is, through work and good governance.
A 42-kilometer road segment connecting the towns of Erseka and Leskovik in southern Albania is currently being paved. The project, financed by the European Union and procured by the European Bank for Reconstruction and Development, (link), envisages the widening of the current road by one meter to make it five meters wide, the systemization of surface water through the drainage channel along the entire length of the road, reconstruction of the layers in case they are damaged, asphalting and signage, all for a little more than 5 million euros. With a cost of 125,000 euros per kilometer, local residents and tourists who like the wonderful landscapes of that side of Albania will be able to enjoy traveling at normal speed.
But the story has another side, the side of a road segment that connects Qafa e Qarri with the city of Erseka, which the Albanian government has procured. Here, the government has decided to build a new road, at a cost of about 40 million euros. If the government had followed the standards of the European Union, the road would have cost 5 million euros and the government would have another 35 million left to build or reconstruct another 300 kilometers of similar roads, in a country where many villages continue to be unconnected with paved roads. But the problem does not end there. By throwing away millions of euros in such an inefficient way, the government deprives Albanians of a piece of potential economic growth, leaving them poor even if the chance gives them oil in Shpirag./Reporter.al
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