Speeches & Transcripts
Media Briefing: South East Europe Regional Economic Report No. 3 - From Double-Dip Recession to Accelerated Reform
December 18, 2012
Ilirjan Agolli, VoA: Which is the headline, the conclusion of this report for Albania and what can countries in the region learn from each other?
Erjon Luci: The headline of this report, as mentioned earlier from the author of the report is that the crisis that unfortunately the region is feeling is longer that what was initially thought. The double dip recession was considered initially impossible, but now the region is under double dip recession. What is important at this second stage of the crisis is not to create other obstacles, adding to those that have been created by the crisis. While the policy of fiscal consolidation maybe difficult, it is important, as we have said in previous statements, for long term trends, beyond the short term. Unfortunately, the crisis was not able to be mitigated linearly as was expected. We go back to what we have said repeatedly on long term reforms such as doing business. Macedonia might be a good example of focusing on the long term, as you really cannot have much influence on the short term period. Even with the good ranking [on doing business], Macedonia is suffering from the big slowdown in the euro zone.
Kseniya Lvovsky: If I can add just in terms of headline, one message which I’m taking from the report is that fiscal and structural reforms must be accelerated. The country and the region cannot afford business as usual.
Nertila Maho, Panorama Newspaper: The World Bank is emphasizing in its report the privatization process should be a transparent one. So far how do you assess the privatization process of Albpetrol, which is the latest strategic privatization in Albania?
Second question: The second one, even though is not on the report what about the CEZ distribution situation, which is related to energy sector?
Kseniya Lvovsky: The Albpetrol privatization generated a lot of expectations which have so far not been met. And I believe we are all waiting for the final outcome of this process to really make a full assessment and reach conclusions.
Regarding CEZ, when this privatization was made, the Bank supported the decision to privatize and the process was sound, even though a little bit rushed. What is happening now is an unfortunate outcome which no one expected and which should not be generalized for all privatizations.
Klodian Tomorri, Top Channel: What is the economic growth rate for Albania, what is the forecast compared to the June report?
Second question: What do you mean by accelerating fiscal consolidation? And the third one: Why do you believe that we are risking a food price shock and why do you think Albania is the most risked country?
Erjon Luci: The forecast have been changed declining by half point of percentage and the latest forecast has been especially reduced due to the difficult energy situation that had hit the sector. I’m not referencing here to the problems within the energy sector itself rather than the weather and the difficult situation this has created for the sector. This was an addition to other difficulties we have discussed earlier, such as the reduction in remittances from our neighbors Italy and Greece, as well as the general slowdown of the economy as the result of the burden of the euro zone crisis on Albania.
This growth is, as we have noted before, much lower than the need to generate employment or to promote the new workforce entrance into the market.
Accelerating reforms include also fiscal consolidation; but it is not strictly related to the acceleration of fiscal consolidation only. It also relates to taking seriously structural reforms such as property rights reforms. It is continuously mentioned that faster progress in this area of reform is needed. So it is not really related to a specific reform rather than structural reforms in general that should take place to compensate the burden on economic growth from the adverse external and internal factors.
Kseniya Lvovsky: I just wanted to add that, as was highlighted in the report, many countries in the region accumulated arrears to private sector and one of the accelerated steps is that these arrears must be cleared as soon as possible. It’s a fiscal management issue, but is also an investment climate and private sector issue. This is a clear win-win which cannot be delayed.
Erjon Luci: As in the food price crises in the past, the exceptional drought in the US and problematic crop conditions in other grain producing regions, led to an increase in international food prices,. In the Albania case, vulnerability is due to the fact that the percentage of food in the consumption basket is high. Even a moderated increase, after two big shocks which have left the level of food prices quite high, can significantly affect the wellbeing of families with low incomes. This is the case when mechanisms such as better targeting and coverage of social assistance can help, and the Bank is currently supporting the government to improve the efficiency, targeting and coverage of social assistance.
Dritan Spahiu, Energjial.al: CEZ Group has announced yesterday they have requested the 60 million partial risk guarantee from the World Bank. Do you confirm this?
Kseniya Lvovsky: The CEZ group has a letter of credit from a commercial bank. The partial risk guarantee agreement is between the World Bank and the Government of Albania which serves as a secondary guarantee to the commercial bank. Generally, when the privatization was concluded, the IBRD guarantee was part of a series of agreements which helped to conclude the deal between the Government and the CEZ company.
I would like to be clear that there is a very elaborate process to follow before this guarantee can be applied. There are a lot of remedies so that both parties can reach an agreement. And only in case it is applied at the end of this remedial process, the guarantee would be converted into an IBRD loan to the government. There is absolutely no certainty at the moment that this will happen. As you know, both parties are engaged in negotiations. We are not involved in those negotiations. We encourage both parties to find an amicable solution under the circumstances, which will work best for Albania and Albanian people.