According to the annual report of the Bank of Albania, for the years 1980 to 1990, the average economic growth was at 0.9%. The largest economic downturn it is in the year 1990 at a level of -10%. The largest economic growth it is in the year 1989 at a level of 9.8%. For the years 1991 to 2000, the average economic growth was at 1.3%. The largest economic downturn it is in the year 1991 at a level of -28%. The largest economic growth it is in the year 1999 at a level of 13.5%. For the years 2001 to 2011, the average economic growth was at 5.3%. The slowed economic growth it is in the year 2011 at a level of 3.1%. The largest economic growth it is in the year 2001 at a level of 7.9%. Economic growth of past three decades of the Albanian economy is growing at an average 2.5%. Based on the data of the last thirty years (one third of the life of the Albanian state) economy in this paper will be presented in reference to significant economic and political factors that affect economic development.

1. Law. Fiscal. Transparency
Electronic copy available at: http://ssrn.com/abstract=2361862
1
AL-Tax Center
Working Papers,
Nr. 2013/12/19
www.al-tax.org
altax@constultant.com
Date 01.12.2013
Tirana, Albania
Economic growth in Albania:
Influencing Factors yesterday, today
and tomorrow
Prepared and distributed: Eduart GJOKUTAJ
Abstract
According to the annual report of the Bank of Albania, for the years 1980 to 1990, the average economic
growth was at 0.9%. The largest economic downturn it is in the year 1990 at a level of -10%. The largest
economic growth it is in the year 1989 at a level of 9.8%. For the years 1991 to 2000, the average
economic growth was at 1.3%. The largest economic downturn it is in the year 1991 at a level of -28%. The
largest economic growth it is in the year 1999 at a level of 13.5%.
For the years 2001 to 2011, the average economic growth was at 5.3%. The slowed economic growth it is
in the year 2011 at a level of 3.1%. The largest economic growth it is in the year 2001 at a level of 7.9%.
Economic growth of past three decades of the Albanian economy is growing at an average 2.5%.
Based on the data of the last thirty years (one third of the life of the Albanian state) economy in this paper
will be presented in reference to significant economic and political factors that affect economic
development.
Keywords: economy of Albania, economic growth, factor of economic growth, development factors,
limiting factors,
JEL Classification: E20, E25, F41, F43

2. Law. Fiscal. Transparency
Electronic copy available at: http://ssrn.com/abstract=2361862
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Introduction
The history of the Albanian economy tells us that we were not aware clearly about the
influencing factors (development and limits) to long-term economic growth. In some
historical periods is confused current economic situation with the economic perception
for the future.
According to statistics from IMF, the annual economic growth has signs of different
levels among different countries. While developed countries have an economic growth
at low levels, the developing countries have a high level of growth. But this fact does not
mean that the high level of growth is better than low level, because countries have
different economic history and development rates.
It is fact that for the period 2002-2012, the global economic growth (see Indexmundi) it
is slowed down to an increase rate approximately 3.2%. While the average economic
growth of Albania during the same period is with an increase at 4.5%. In the first half of
the period there was an increase in the average trend 5.8%. In the second half of the
period, the growth is slowed (especially after 2008) with an average growth trend at
3.2%. But there are not the same reasons as those of economically developed countries.
For the same period the Balkans have had an average economic growth at a level of
2.9%. The first half of the decade there was an increase at 3%, while the second half had
an average economic growth at 2.8%. Analysis of the causes of these levels deserves a
detailed comparison of investment, population growth, human capital development,
public finance and economic history of each of the Balkan countries.

3. Law. Fiscal. Transparency
1. How the economy has moved into Albania and what has influenced its development?
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According to the annual report of the Bank of Albania, for the years 1980 to 1990, the
average economic growth was at 0.9%. The largest economic downturn it is in the year
1990 at a level of -10%. The largest economic growth it is in the year 1989 at a level of
9.8%.
For the years 1991 to 2000, the average economic growth was at 1.3%. The largest
economic downturn it is in the year 1991 at a level of -28%. The largest economic
growth it is in the year 1999 at a level of 13.5%.
For the years 2001 to 2011, the average economic growth was at 5.3%. The slowed
economic growth it is in the year 2011 at a level of 3.1%. The largest economic growth it
is in the year 2001 at a level of 7.9%.
Economic growth of past three decades of the Albanian economy is growing at an
average 2.5%.
But, has been there the economy a need for a higher economic growth than that?
Based on the data of the last thirty years (one third of the life of the Albanian state)
economy in this paper will be presented in reference to significant economic and
political factors that affect economic development.
These factors are not object of bias, because of the political system, as no change,
except could show a decrease of their influence. But, on the other hand they should not
be confused with the factors that impede economic development.

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4 development factors (social, economic and political)
1. Mining natural resources and energy resources, as well as a developed system of agriculture
and livestock are the elements that are included in this very important factor for the country.
Natural resources combined with the geographic location and other development factors give
the economy the proper breathing to be developed low cost.
2. Investment in development of assets (infrastructure, emerging industries) is a long-term
factor for developing, to reduce the cost of economic activities. Attached to the industry
development should never stop the factor of technological development, oriented from
government programs. It is the accumulation and capital formation that increases industrial
productivity, coupled with the workforce with high skills in terms of its use. The largest role
remains to foreign investors, but without underestimating domestic investors, who should see
the opening of the economy.
3. The increase of the quantity and quality (value) of labor (human capital) and specifically the
part that invest in increasing capacity and improving its quality is a significant factor with a
direct impact on economic growth. Of course, the risk of lack from the intervention of
government can create problems with the decrease of level of employment.
4. A democratic political environment with a modern institutional framework should be
considered as a factor contributing directly through the principle of good governance, which
interferes in the regulation of the economy under the laws and rules. Every institution of
government has its role in the economy, according to the functions for which is created.
Macroeconomic stability reduces the risk of investment and in this context should be considered
as a necessary condition in favor of economic growth.
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3 limiting factors (political, economic and social)
1. The political instability and uncertain institutions and inflexible in implementing legal system
(physical and intellectual property, financial system, taxes), widespread political corruption,
poor macroeconomic management, limited economic freedom and limited opening of markets.
Reduction of customs tariffs (trade barriers) are a prerequisite in favor of economic growth,
through their effect on the function of expanding of markets and increase of penetration of
products between countries (especially cross-border ones).
2. Low level of workforce skills, lack of knowledge to the modern technology, lack of political
culture, cultural and social, limited labor market
3. Old technology and low investments for its develop, orientation of economy that excludes
technology (trade, tourism), investments that doesn't favor long-term development, and poor
infrastructure
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Analyze applies to all limiting factors as below, which have been since the early 90s and
still continue to be so, the three together over the last two decades.
2. Based on the combined analysis and the comparative data on the performance of the
economy, and the level of influence of factors in the economy of the past thirty years
(1980 -2011), if it can be divided into three parts shows that for the first decade there
has been a limiting use of the first factor and fourth.
Dominant part of economic development during the first period (1980-1990) consisted
of exploitation and processing of mineral natural resources, mainly for export to the
extent of 20% of GDP, and the development of agriculture’s for domestic consumption
and export to the extent of 55% of GDP. Even government through institutions
exercised a strong authority and political stability for economic and social development.
Obviously, the impact of only these factors can't give effect to economic growth, which
fell on average by 4 percentage points compared with the average of the previous

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decade economic development. Lack of freedom of de facto property according to the
model of the self-administration for the rural areas was the end of a model that was not
to increase the economy, but the opposite. The year 1989 is different (9.8% increase),
because being the year that followed the debate a year ago to change the political
regime through change of the economy. This historic change was preceded by some
initial ways of liberation from the yoke of socialist economy itself. A complete and
comprehensive analysis of the factors did not take place even though there are specific
analyses of professors of economics.
The second half of the period (1991-2000) is dominated by a use of all the factors, but
not coordinated in time and space with each other. Lack of capital continued to be the
cause of poverty in the country. This is the period, when natural mineral resources were
not part of the new technology investment, in agriculture was not followed by
investment for as long as to replace its leadership role in the economy. Freedom of the
property was declared, but began to turn into a freedom that 'kills'. Private property
does not become sacred to the economy. In this way, was not achieved the
encouragement of the individuals and investors to begin to invest money to maximize
their profit in the new economy and to give breathe for long-term perspectives of
economy based on property development. But, quite wrong economic direction of
political and economic leadership of the time was clearly reflected in allowing the
pyramid scheme. All this showed immaturity of leadership to lead the country towards
economic development.
But are learned the lessons by the leadership or anybody of them felt the responsibility?
Can be feel all quiet now?
Investments in the industry that somehow will have shaped the economy were sporadic
and oriented to the politics of the moment, without the proper vision that requires the
open economy. Attached with the economic and social situation was the lack of a
growth orientation of human resources for training towards a specific industry,
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excluding initiatives with little weight on the economy through processing of imported
raw materials for exporting to European markets (façon contract).
For the third period (the last decade) has been growing interest in natural resources, but
increase of political patronage versus the resources of the economy, for own private
interest in leadership, today old, did not create any opportunities for the organization
and strengthening of investment in extractive industry and agro-industry. Although, the
factors have been involved in a discrete mode, where the EU statistics, and of the
Albanian institutions show for Foreign Direct Investment funds that reached up to the
level of 9% of GDP, the economy does not got the proper quantity of 'energy' in order to
have a sustainable economic development, based on the coordination of the four
factors. So, if it were otherwise, then the economy will had a continuing growth trend.
But, in fact the decline of growth happened for at least the last four years. The largest
increase was in 2008 (7.5% increase) and immediately in following year the growth was
slowed down and was less than half (3.3% increase), without changing of external
factors, or internal. The economy did not had an immediate effect from the non
coordination of the factors. In segments of industry and government the ideas were
misused in favor of the private interests of fictitious economic elite.
3. Clinton once said that technology is the engine of economic development.
With the rapid introduction of technology in the economy it facilitates the creation of
new jobs, builds (reconstruction) industrial sectors to maintain the appropriate columns
for long-term economic development. But, it also helps the country's governance
through technology harmonization with the objectives of environmental protection and
enhances the interest for foreign investors and for the visitors. Once are chosen the
industries that will be promoted for long-term economic development, then will be
oriented the increase of skills and qualities of the workforce through the education
system in the country, in order to penetrate into regional markets of labor and
technology.
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Although the analysis should not be considered as complete within this format, I think
that today's economy, as mentioned in the reports of the IMF, on budget policy, and the
recommendations of the World Bank office that are on the same page with the idea of
coordination of development economic policy, which is structured according to the
factors mentioned above. Never should forget, the economic structure and its political
transformation after the regime collapse. Albanian economy is dominated today 70% of
the trade and service sector. On the other hand, it should be noted that capital
accumulation as a consequence of economic development, was concentrated in the
hands of few individuals, linked with stories of corruption. The accumulation of capital,
around a few people and businesses is a major reason for the apparent slowdown of
growth in recent years.
It is this structuring, which should begin to shape today's economic model. This year
should serve as a prelude to the start of the project to long-term sustainable economic
development (economic policy) of Albania of tomorrow, based on the model that passes
through the four points above, as a theorem that is implemented from all states
already, seeking development through the model.
How will know us if the government will carry out its duties and will be a factor of
economic growth developer?
The answer can be found in monitoring the quality of governance (World Bank) that
could be measured through accountability, political stability, absence of state violence,
effectiveness of governance, institutional framework, implementation of laws at full
capacity, and control of corruption.
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