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    Ju1.2010,Volume7,No.7(SerialNo.5JournalofUS.ChinaPublicAdministration,ISSN1548-6591,USA

    ;TheeffectsofglobalcrisisontheAlbanianeconomy

    ;AlbanaKacol~aMadhi

    ;(DepartmentofBusinessAdministration,FacultyofEconomy,University’’AleksanderXhuvani”Elbasan,

    ;Elbasan3001.3006,Albania)

    ;Abstract:EastEuropeancountries,includingAlbaniaaren’ttotallyimmunefromthetroublesofthe

    ;internationalfinancialtrade,althoughtheywillnothavedirectinfluenceontheirfinancessystem.Theseeffectsof

    ;theglobaleconomycrisishavebeguntobefeIteveninAlbania.Thepoorclasseswillbemuchmoreandfaster

    ;effectedfromthiscrisis.Thisarticlewilltreattheeffectsofthecrisisintotheseclasses,andtherisksthatthis ;crisisbringstotheirfinances.Importantfactorsforthiswillbethedecreaseofthemonetaryincomesinthe ;country,theemigrantremittanceandforeigninvestmentsdecreaseandasaresulttheywillinfluenceinadecrease

    ;oftheincomeforpersoninthecountry.whichwillhavemuchinfluenceatthisleve1.Theintentionofthearticleis

    ;totreatthepoliciesthatshouldbetakenbythegovernmenttoprotectthem.Thegovernmentofthesecountries

    ;shouldbeconcentratedinthesocialprotectionofthepoorclassesandinthewaysofovercomingthecrisisfor

    ;them.

    ;Keywords:globalcrisis;Albanianeconomy;poorclasses;governmentpolicies

    ;1.IntrOductiOn

    ;1.1Howmucharethedimensionsofthefinanciaicrisis?

    ;Thebasicfinancialinstrumentswiththehelpofwhichthefinancialmarketinanuncontrolledwayis ;increasedhavebeenthefinancialderivates.Byexploitingtheseinnovatoryproducts,theAmericanbanks

    ;‘‘repacked”thebadmortgagecredits,whichtheyhavesuppliedwithcreditorratingforthefirstclass(sohe

    rewe

    ;havetodowithspeculativerating),andtheyhavesoldthemtoEuropeaninvestors.Sothemarketofthefinancial

    ;derivatesisthemainsegmentofblowingtheglobalfinancialballoon.AccordingtotheBISevaluation,theprice

    ;ofthevaluablecontractsintheendoftheyear2007hadreachedtheincrediblefigureof600trilliondollars. ;whichdemonstrateslltimesmorethanthevalueoftheworldproduction.Tenyearsago.thevalueofthis ;financialsegmentwasonly75trilliondollars.Thefinancialderivatesisincreased.knownasCDS(creditdefault

    ;swaps)hasenabledtheinsuranceofproductsofthemortgagecreditsto55trilliondollars,asumthatismorethan

    ;thewholevalueoftheAmericaninhabitationfund.

    ;1.2WhOprofitedfromthiscrisis?

    ;(1)Thosewhoarethemainbeginnersofthiscrisis:manymanagers,bankers,bankingandfinancial ;mediatorswhoereateddifferentproductsintheknownstock.marketswiththepromiseofnon.realbenefitforthe

    ;financiersbysecuringforthemselvesthejmmediatebenefitonthejnvestedcapitalfromtheothers. ;(2)Thestrongbankswhichinthepassingoftheyearsabsorbedtheprofitontherealizedinvestmentsfor ;themselvesandfortheothers.

    ;AlbanaKacolljaMadhi,lecturer,DepartmentofBusinessAdministration,FacultyofEconomy,University”AleksanderXhuvani’’

    ;Elbasan;researchfields:strategicmanagement,projectmanagement,SMEmanagement. ;23

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    ;globalcrisisontheAlbanianeconomy

    ;(3)Thestrongbankswhich,withanincrediblespeed,realizedthepurchaseoftheothercompetitivebanks ;withasymbolicpriceinthiswaybystrengtheningtheirpositioninthebankingmarketinordertobethefirstin

    ;thefutureafterthecrisis.

    ;1.3Butwhowerethelosers?

    ;ThelOSSwasseen:

    ;(1)Especiallyinthebanksanddifferentfinanciersinsearchofabiggerprofit;

    ;(2)Thedifferentorganizationsofthepensionfunds.Thelosswasevenobservedinthecitizens.millionsof ;familieslosttheirinvestmentsandtheirfinancialbudget;

    ;(3)Soitisbelievedthatthesefamilieswillsufferfromthegreatfinanciallosingthroughthedecreaseofthe ;purchasingpowerandthegrowthofthetaxeswhichwillbedecidedbythegovernment; ;(4)Thousandsofemployedpersonslostintheeconomy.Theconsequencesofthiscrisishavestartedtobe ;felt,andthesecondsectorafterthatfinancialistheautomotiveone,wherethemostpartoftheautomotive ;producersarelookingforthehelpoftheirgovernmentandgenerallyhaveinterruptedtheproduction; ;(5)Theinputofthenondevelopedcountrieswillbedecreasedbybeinginfluencedbythequickdecreaseof

    ;thestockintheworldmarket;

    ;(6)Thebiggestloserofthiscrisisundoubtedlyistheworldcapitalistsystemitself. ;Theglobalfinancialcrisisthathasspreadaroundtheworldhascausedaconsiderableslowdowninmost ;developedcountriesandhasalreadyaffectedfinancialmarketsandgrowthprospectsindevelopingcountries.

    ;ManyLICs(1owincomecountries)havemadegreatstridesinstrengtheningtheirpolicyframeworks,reducing

    ;povertyandreformingtheirfinancialsystems.Butmanyremainhighlyvulnerabletoadeepglobaldownturnthat

    ;socloselyfollowsthe2007/2008foodandfuelpriceshocks.Financialmarketlinkagesaregenerallyweak,but

    ;second?roundeffectsoftheeconomicslowdownonthefinancialsystemcouldbeparticularlysevere.Without

    ;additionalaid,thescopeforcountercyclicalpoliciesislimitedformostLICsduetobindingfinancingconstraints

    ;andfragiledebtpositions.ThiscouldbothdeepenandprolongthecrisisinLICs,andsetbackthefightagainst

    ;poverty(IMF,2009).

    ;Theimpactonthesmallerandmorevulnerableeconomies,especiallyindevelopingcountieswhich ;obviouslyhadnoroleinthecreationofthecrisis.willberegardlessofthatmuchaffected. ;2.Albaniaisinfluencedbytheglobalcrisis

    ;TheglobalcrisishasstartedtotransmitthenegativeeffectsintheAlbanianeconomy.TheInternational ;MonetaryFundcontinuestodecreasethepredictionsfortheeconomygrowth,bysayingthattheglobaleconomy

    ;intheyear2009canbeintheIowestlevelin60years.Thisdeteriorationoftheglobaleconomywillcausea ;biggerdecreaseoftheeconomygrowthofAlbania.BERZH(EuropeanBankforReconstructionandDevelopment)

    ;declaresthattheeconomygrowthinAlbaniaisexpectedtoreachthepercentageof6.1%intheyear2008,from

    ;6%intheyear2007.

    ;Thereductionoftheincomesfromtheemigrantsandthereductionofexportsaresomeofthefirsteffects ;thatAlbaniaisbeingfacedwith.Theleveloftransportsisconsideredtobenegative.Whilethelastyear,in ;November,itwas15%.Thisisaphenomenonthatwasunseenbeforeforthewholeregion.Thedevaluationoflek

    ;isobviousandtheAlbaniansarefacingtheworldcrisisandsomehowtheimprudentpoliticsoftheAlbanian

    ;government.Anotherfactthatclearlyidentifiesthatthecrisisissatcross-leggedistheemigrants’remitta

    nces.The

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    ;TheeffectsofglobalcrisisontheAlbanianeconomy

    ;remittancesduringthethirdthreemonthsperiodhaveanobviousdropbyfallingdownwithafigureof2

    8.2%

    ;comparedwiththesameperiodofthelastyear.TheNationalBankofAlbaniainthesamereportpublishedin

    ;Decemberoftheyear2008clearlyexplainedthattheremittanceshadadropof13%,inthiswaybycreatingchaos

    ;initsdata.becausesomehoursbeforeithaddeclaredthefigureof23%.

    ;SomeotherfactsthatdemonstratetheeffectsofglobalcrisisonAlbaniaareasbelow: ;(1)Thegradualraiseofpricesespeciallyrelatedwiththeconsumptionitems;

    ;(2)Theinflationraiseandthegradualdevaluationoflekintheforeigncurrencymarket; ;(3)Theincomesfromthetaxesandthecustomshouseshavestartedtofalldown;

    ;(4)Thedropintheprocessoftakingthecreditsandthebankdepositsin34%from50%intheyear2007; ;(5)Adrasticdropoftherealestatesaleswiththefigureof50%.

    ;ThefinancialcrisishascausedeveninAlbaniaadropinthepurchasingpower.Thisfactisconfirmedbythe ;dropofimports,eventhoughthecustomhousedeclarestheirincrease.In2008,thecountryhasbecomeasmaller

    ;quantityofimportgoodswherethemostpartofthemconsistsofgrocery.Referringtotheofficialfiguresofthe

    ;customhouse,thequantityofdutypaidgoodsfor11monthsintheyear2008islowerthanthequantityimported

    ;intheyear2005.

    ;3.TheimpactofcrisisinAlbania

    ;(1)Thedropofincomesbyemigrants;

    ;(2)Thedropofdirectforeigninvestments;

    ;(3)Theraiseofpricesofgroceryandnongroceryproducts;

    ;(4)Thedropofexchangecoursefortheinternationalcurrency;

    ;(5)Theconstrictionofcreditsgivenbythebank;

    ;(6)Thedeteriorationofthecommercialdeficit;

    ;(7)Theimpactonthehousesmarketasaresultofachangeinthepricesofimportedmaterials; ;(8)Thedropofthedepositinterestrateinbanksbeingdependentontheforeigncurrencycourse ;4.GlobaleconomicdownturnaffectsAlbania’seconomy

    ;Theglobaleconomyisinthemidstofadeepdownturn,affectingtherealandfinancialsectors,whichis ;takingitstollbothinadvancedandinemerginganddevelopingcountries.Allmajoradvancedeconomiesarein

    ;recession,whileactivityinemerginganddevelopingeconomiesisslowingabruptly. ;LICsareexposedtothecurrentglobaldownturnmorethaninpreviousepisodes,astheyaremoreintegrated

    ;thanbeforewiththeworldeconomythroughtrade,FDIandremittances.Thecrisissignificantlyimpactsthese

    ;countriesthroughreduceddemandoftheirexports.Sincemanyarecommodityexporters,theywillbehardhitby

    ;thesharpdeclineindemandofcommoditiesandintheirprices.ManyLICsarealsohitbylowerremittancesand

    ;foreigndirectinvestment(FDI),whileaidflowsareunderthreat.Growthofremittanceswasflatinthesecond

    ;halfof2008,andisexpectedtobenegativein2009.

    ;AsharpslowdowninFDIisexpectedinabouthalfofall

    ;LICs.

    ;ExpertsprojecttheglobaleconomiccrisiswillhavearelativelymoderateimpactonAlbania,sincethe ;countryonlypartiallyintegratedwithworldmarketsandstilllacksacapitalmarket.Theabsenceofastock ;exchangeandprevalenceofinformaleconomicpracticesareexpectedtominimizedamagetoAlbania’seconomy.

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    ;nianeconomy

    ;TheAlbanianeconomicactivityduringtheyear2008performedgenerallyinlinewiththeear1y. ;yearprojections

    ;intermsofeconomicgrowthandpreservationofmacroeconomicbalances.However,thelastquarteroftheyear

    ;sawtheincreasingimpactoftheglobaleconomyslowdown,principallyontheperformanceoftheAlbanian

    ;balanceofpayments.Thefallofforeigndemandandincreaseinunemployment

    ;,inparticularintheneighbOring

    ;Euroareamembercountriespromptedthedeclineofexpo~sandworkers’remittances

    ;,

    ;hencemOderatingthe

    ;domesticdemandforconsumption.However,statebudgetrevenueandexpendituremetclosetotheprojections

    ;andrecordedarelativeannualincreaseby15and23percent,respectively.Theannualincreaseofconsumerprices

    ;reducedto2.2percentinDecember.Newsovertheinternationalsituationinthelastquarterof2008enhancedthe

    ;Albanianpublicsensitivenesstothesafetyoftheirsavings.However,thebankingsector---asexpectedlhandled

    ;thissituationverywellbeingwellcapitalizedandliquidattheendof2008.

    ;ObserversexpectAlbanianexportstoItalyandGreecetodecline.Itisbecomingincreasinglyhardtoobtain

    ;credit,andforeigndirectinvestorswillalsofacedifficulties.Publicinvestments,mainlysupportedthrough

    ;foreigndebt,willriseincost.Expertspointoutoneoftheprincipalconsequencesoftheglobalcrisiswillbea

    ;decreaseinemigrantremittances(whichprovideabout14%ofGDP)fromAlbanianslivingmostlyinItalyand

    ;Greece.Therewillbedifficultiesinguaranteeingeconomicgrowthin2009.Byconsideringthesefacts,business

    ;inmanysectorswillhaveahardtimetoincreaseinvestmentandemployment.

    ;However,FinanceMinisterF.

    ;Mimasaidthebudgetfornextyearinsurestheeconomyagainstsuchrisks.Thebudgetof2009hasthehighest

    ;levelofcontingentfundsever.

    ;5.TheimpactofremittanceontheAlbanianeconomy

    ;EmigrationhasaprimaryimpactontheAlbanianeconomyasaresultofemigrants,remittances.The ;remittancesofAlbanianemigrantscontinuetoconstituteavaluableeconomicaidnotonlyfortheirfamiliesbut

    ;fortbesocioeconomicstabilizationofthecountryasawhole.Flowofincomesbyemigrants(remittances)isan

    ;importantsourceoffinancialgrowthandeconomicdevelopmentofthecountry,

    ;bysecuringongoingaccessto

    ;foreigncu~encyintheAlbania,aswellasbyconsolidatingthebasisforsavingsandinvestment. ;Inananalysisof

    ;remittancesflow,duringthetransitionperiod,weseeaconsiderableincreaseduringtheyears.Thecontributionof

    ;emigrants’remittances,foraperiodofl1yearsisestimatedabout15%ofgrossdomesticproduct.Also.the

    ;contributionoftheseremittancesinthetradebalance,foraperiodofllyears,isestimatedtobearound58.8%.

    ;EstimatesoftheBankofAlbaniashowthatintheyear1992emigrants’remittancesamountedto150milli

    onUS

    ;dollars,whereasintheyear2002remittancesreachedto690millionEuros.During2007,migrantremittancesto

    ;theirfamiliesestimated951.7millionEuros,withaslightannualincreaseof1.

    ;5percent.Lookingatthese

    ;considerableamounts,theIMFExecutiveBoardhaslegitimatelyaskedtheAlbanianauthoritiesfordueattention

    ;toremittances.

    ;Remittancesrepresentthemostdirectandimmediatebenefittoemigrants’familiesandtotheeconomy.

    ;Remittanceflowstodevelopingcountriesarenowestimatedtobetwiceasmuchasthedevelopmentaidthese

    ;countriesreceive.InsomecountrieslikeAlbania,theynoticeablyexceedforeigndirectinvestment.Therefore.

    ;governmentsnowadaysarepayingmoreandmoreattentionintheirdevelopmentstrategiestoremittanceflowsas

    ;animportantfinancialsourcetoboosteconomicdevelopment,especiallyindepressedareaswhereeconomic

    ;conditionsforcepeopletomigrate.Akeyinputforthesepoliciesistheeconomicandthelogisticframework

    ;behindmigrationandremittance.

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    ;TheeffectsofglobalcrisisontheAlbanianeconomy

    ;Sincethebeginningofthetransition,thevolumeofremittancestoAlbaniahasgrownrapidly.Indeed, ;remittanceflowsareincreasinglyimportantrelativetootherforeignexchangeearningactivities,repr

esenting

    ;around14percentofGDP,70percentofexports,and33percentofimports.Italyisthemajormigration ;destinationcountryforAlbanians.

    ;ReferringtotheBankofAlbaniaReportfortheyear2002,weseethatremittancesrepresentedabout12.9per

    ;centofGDP,whichwerealmosttwiceasmuchasincomefromexportsandabout4.5timesbiggerthandirect

    ;foreigninvestment.RemittancesaregreaterthanforeignaidgrantedtoAlbaniaeachyear. ;Ontheotherhand,emigrants’remittanceshelpthecountryeconomyinfinancingtheexternaldeficit,raising

    ;thelivingstandardsinparticularofbenefitingfamilies,andpovertyreduction.Migrantremittancesalsoplayan

    ;importantroleinthecountry’Smacroeconomicstabilitybyfinancingimports,affectingthevalueoflocalcurrency

    ;andtherapiddevelopmentofconstructionandservicesectors.Theirimportancecanbemeasuredalsowhen

    ;comparedwithFDI.In2007,theinflowofforeigndirectinvestmentintheAlbanianeconomyreached460

    ;millionEuros,whilethevalueofremittanceswas951.7millionEuros(seeFigure1andTable11.Theremittances

    ;havebeenalsohigherthanexportsthatin2007reached785millionEuros(seeFigure2). ;Figure1InflowofremittancesandFDIinAlbania(millionEuros)

    ;Source:INSTAT,2010(AlbanianInstituteofStatistics).

    ;Figure2Tradeflowsduring19932008(millionlek)

    ;Source:METEandACITdatabase.

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    ;theAlbanianeconomy

    ;Table1InflowofremittancesinAlbania(millionEuros) ;Y_ear20002001I2002l200320042005I2006l2007f20082009 ;IRemittances570620I690l710780800I940I951.7I913.7789 ;Duringthelastyears,theseemigrants’flowincomesarenotonlyconsideredasrevenuefornonproductive

    ;purposes,meetingthebasicneedsrelatedtoactualimprovementoflivingconditions,butalsosourcesoff

    unding

    ;forproductivepurposes,intheformofshortandlongterminvestments,creatingnewjobs. ;6.Governmentpoliciesonsocialprotectionstructure ;TheAlbanianGovemmentisfocusedonthefieldofsocialprotectionintwoterms.Relatedwiththe

    ;short-termperiod,theydohavetheimprovementofthesystemofthesocialprotectionandstandards,

    ;byfighting

    ;thesocialexclusionanddiscriminationthrough: ;(1)decentralizationandraiseofresponsibilityoflocalunitsontheestablishmentandadministrationofso

    cial

    ;services;

    ;(2)incorporationo?

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