 Journalist:
How do you assess the Albanian economy during this year, having in mind the economic policy in the country but also the world economic events (crisis)?
Mrs. Nuamah:
Newly-prepared quarterly GDP data are a welcome innovation in Albania's macroeconomic statistics toolbox that can help the households and businesses to take stock of the health of the economy during the year. The data for 2008 through September -- the third quarter -- indicate that the economy was doing quite well in comparison to 2007. The data indicate that some sectors were thriving, e.g. telecoms, financial services and tourism, while others, namely private construction, industry and transport are already feeling the strains of global economic slowdown. Nevertheless, the data provide some reassurance that, in 2008, the economy was moving close to its potential, despite the volatility of commodity and food prices, and the later impact of global economy on remittances. [It is important to note that new quarterly GDP estimates often diverge from the final annual GDP growth estimates, so while these new estimates are positive, comparing them to Albania's past GDP growth rates should be approached with caution.] Journalist:
What is your prediction for country economic progress for the next year? (Considering that it will be an electoral year)? Mrs. Nuamah:
Provided Albania continues to move apace with structural reforms, the economy should continue to make progress in 2009, notwithstanding that it is an election year. The privatization of the electricity distribution company should mark a turning point for this crucial sector, provided the authorities can agree on a sound and sustainable regulatory framework, going forward, and a transitional financial plan for the sector in 2009. Improvements in the management and governance of the education sector, should continue a pace so as not to lose precious time on what is a long term agenda. Likewise, the publication of results from the 2007 Living Standards Measurement Survey will be important to ensure that resources, such as those for the feeder roads program, continue to be directed to Albania's most vulnerable regions. Finally, we would encourage all political parties to continue to work together towards a long term strategy for both pension system reform and social assistance, notwithstanding the sensitivity of these issues during election time. Journalist:
In your opinion, in what measure will global economic crisis will impact our economy? Nuamah:
The global economic crisis will certainly moderate economic growth rates in Albania, but it is not expected that the economy will be as severely affected as many of its European neighbours. This stems in part from the fact that Albania has traditionally followed sound fiscal and monetary policy, the exposure of its banking sector to foreign borrowing is comparatively low, and the country has moderately levels of external debt. Nevertheless, given the uncertainties ahead, maintaining prudent fiscal policy, even in an election year, will be a critical factor in how the economy weathers the coming storm, and retains resources to protect the most vulnerable in society. Below you may find the interview of Camille Nuamah, the World Bank Country Manager to Top Channel TV  Journalist:
INSTAT declared recently a 9.9% growth till September. What is your opinion on this? Does this growth derives from sustainable sources or from accidental ones?
Mrs.Nuamah:
The publication of the quarterly GDP estimate is a long awaited development in Albania. It is very, very useful for helping the public and businesses to test the temperature of the economy in the middle of the year. However, it’s quite important for the people to understand that there is a difference between the quarterly GDP estimates -- which provides a sense of where the economy is going -- versus annual GDP estimates, which is fully computed based on the entire production of the economy during a year. At the beginning when a country starts to make these estimates – quarterly and annual GDP – the two can be quite divergent. Let me give an example. One way in which the quarterly GDP is estimated is by looking at the survey data or leading indicators you may have in any economy. Take the tourism sector. In order to get a quarterly estimate, the authorities may look at the number of visitors that arrived [in any month], which may suggest the growth of that sector from one year to the next. However, to compute the final GDP, lots of other things have to go into the calculation including how much [the tourists] spent, the production of certain services by the tourism sector, in transport and other services that tourists may use and the expenses the hotels had to incur in order to provide those services. So, while we are very pleased [with the introduction of quarterly GDP]. The figures that you see presented in the quarterly GDP do suggest that the Albanian economy is doing better that last year. Nevertheless, we would like to caution the public that it would be premature to compare them [the quarterly GDP estimates] to the final estimates of annual GDP growth that we have, say, of 2006 and 2007. Journalist:
What is your forecast for next year country economic development? Mrs. Nuamah:
The ongoing international crisis is likely to affect the Albania’s economic growth in 2009 and will likely hurt the poor. The first signs of the impact have been felt in the slow down of remittances, which are likely to affect consumption and imports and moderate the current account deficit. We do expect that growth will decline [in 2009], but Albania still stands on a good footing to outperform many of its regional neighbors. Because we don’t know how long the crisis will last, it’s important for the country to take a very conservative approach to fiscal policy. We encourage the Government to stick to the targets it has set for the [fiscal] deficit and to continue to explore avenues to finance that deficit. However, if revenues are lower than anticipated -- because the slowdown is deeper or longer than we expect – the Government should stand ready to adjust its expenditures in order to achieve its deficit targets and avoid crowding out the private sector. That said, Albania’s tradition of good macro policy, the relatively low exposure of its banking sector to external borrowing, and its moderate levels of debt put the country in a good position to withstand international crisis. In addition, if the country accelerates its structural reforms and improves its competitiveness, we think that Albania will be in a good standing for reaching its potential and weathering the storm.
The poor in Albania are disproportionately receiving remittances. As such, these households may feel a crunch in their budget[s]. Our recommendation to the Government will be, within the conservative fiscal policy outlined, to reserve resources that may be needed, as this crisis unfolds, to support the poor through social assistance.
Below you may find the interview of Camille Nuamah, the World Bank Country Manager to Vizion Plus TV
 Journalist:
1. The World Bank is the main donor in the energy sector. How would you assess the performance of this sector?
Mrs. Nuamah:
As you know, the energy sector remains a very complex challenge for Albania and I think from the Bank’s perspective we can say that the performance over time has been variable. Journalist:
2. The distribution system operator (OSSH) is now privatized by the Czech Company CEZ. What do you think will improve in terms of this system management?
Mrs. Nuamah:
This week the government started negotiations with the winning bidder and we are hopeful that these negotiations will be through a successful transfer of the assets to the private company. If you can think about the electricity distribution system like an olive grove, that has been planted many years ago but tended only by a young boy who remembers little of what his grandfathers used to do. Bringing in a private commercially minded company to manage the distribution system is like bringing in an experienced farm manager to that grove. Clearly, they will bring resources and technology to address the billing, the collection systems, the techniques for dealing with delinquent customers, resources to address some of the technical problems in the distribution company, but alone, it is difficult, because the system like the olive grove is going to require a road to the market, you know, a good price of olives on the world market and, perhaps, irrigation. So, if we think about Distribution Company like this, clearly the supply of energy is important. The technical quality of the transmission network and the price on which it is operating is crucial. Journalist:
3. Let’s focus on energy. We are approaching winter season, so how do you foresee this season, are we going to have power supply as we are before the elections? Mrs. Nuamah:
The weather forecast for this year do not look very positive, and unfortunately, this looks to be the third year in a row that Albania might be hit by a dry winter season. This is going to have an impact on the supply of hydro power and to ensure energy supply to household and businesses may be important or necessary to increase imports. However because the region has underinvested in energy supply for such a long time, those imports are quite expensive. As such the cost of ensuring uninterrupted supply will be higher, than if we had seen a good weather forecast. So the question is on the eve of privatization is: Are Albanian households and business prepared to pay what it would cost to ensure this energy supply in an uninterrupted way. And, as well, are they willing to participate in improved governance in terms of discouraging their colleagues and neighbors and business partners from illegal connections to the electricity system. I think that these are important questions because potentially Albania has in hand the ability to engage a new partner in its electricity supply system. But that partner will look both at the government and to the public to move ahead and forge progress. Journalist:
4. You stated that that this winter is expected to be, let’s say, a dry season and, therefore high-priced imports are going to increase, then in order to cover the cost with the power sale should there be a power price increase, especially now that we approaching the elections? Mrs. Nuamah:
Well, it is not for the Bank to determine whether there is a price increase, it for the energy sector regulator to consider the situation, to consider the negotiations to the private company and to consider the finances available to the government. And we are confident that the regulator has the capacity to analyze all of these factors together with the current situation and to take the appropriate measures. Journalist:
5. What is the progress of the World Bank investments, specifically in the case of Vlora power plant? What is the total investment, let’s say the total funds that the World Banks has provides for the energy sector in Albania over all of these years? Mrs. Nuamah:
Let me just say that in total the donor community has about of $ 300 million USD in financing for the energy sector on the ground and I think that is a testimony to the confidence that the sector will improve and improve services. The World Bank has $ 90 million USD in investment: one that you mentioned for the thermo-power plant in Vlora, for which, I understand, construction is proceeding well and it remains on schedule to be available for commissioning in mid next year. We also have some support to the transition system and as well a new project that we signed with the Government in summer for safeguarding the dams.
Journalist:
6. Recently Albania has graduated to another stage, thus moving out of the stage of receiving soft loans where the World Bank has been the main donor. What should the Government of Albania be cautious of at the stage it is in bearing in mind also the situation, the global financial crisis? Mrs. Nuamah:
First let me say that the graduation from concessional financing to more commercial financing from the Bank is a mark of success. In a decade and a half, the country has made strong progress on growth and poverty reduction. In the midst of an international financial crisis Albania finds itself in a stronger position than most for weathering the storm. The long-standing tradition of a strong macromanagement and good monetary policy are very critical at this time. At the onset of the crisis Albania’s banking sector had stronger ratios than most of the countries in the region. Nevertheless, of course, it’s time to remain vigilant, but to also be realistic about the times ahead. Our advice in terms of the financial sector is for the authorities to continue what has been a very strong program on banking supervision, to remain more closely monitoring the situation and the markets, and to continue this regular communication that they have with the commercial banks and their management. In terms of the real sector, Albania is connected to the global economy and as the global economy and Europe’s economy slowdown. This will affect the Albanian economy. Our advice to the government ought to be to preserve this tradition of strong macromanagement but also in times like this to be fiscally conservative in order to save up resources that may be needed in the future to help with a more smooth adjustment of the economy. In particular, if the transmission mechanism of this global slowdown comes through remittances those kinds of resources are going to be necessary to help soften the impact of this adjustment on the poor. And in that respect fiscal resources that may normally be directed at an expansionary stance, particularly with respect to the public sector wages, might be well persevered to be available for social assistance and social protection during the times ahead. Journalist:
7. When looking at all these data of the Albanian economy and looking at the 2009 budget, which is expected to be adopted by the by the Parliament, do you think that the global crisis will affect Albania in the near future and, which are the most fragile and vulnerable sectors likely to be affected? Mrs. Nuamah:
I think that a slowdown of this nature in the global economy is going to have a broad-based impact. Sectors like services, manufacturing, construction, industry are likely to be affected. But a country like Albania which is already in the process of structural reform to help release the investment energies and redirect them in these sectors actually is a straw position. Provided Albania continues these structural reforms may have a momentum than can help to soften the impact of the future slowdown. Let me take one moment to mention agriculture. This is a sector that has seen a change in world outlook over the last year with the increase of the food prices. And we know that Albania has enormous potential in this area. So I would suggest that this could be one of the sectors that can continue to perform and to grow in times like this, of course, very important for the poor. Journalist:
8. What is your opinion, let’s say actually IMF has concluded a cooperation stage with the Government of Albania. At a time when the global crisis has affected also other countries in Europe, do you think that IMF and the Government of Albania renew once more this program with IMF? Mrs. Nuamah:
There are many different forms of relationship between IMF and countries. In my own country we have had a very long standing relationship, but which has gone through many phases. At times we had a full-fledged program and other times we have had staff-monitored program. There are a range of interactions that we had with the Fund. I can only say that this is more of an economic rather than an political decision and we think that both the government and the Fund are well-placed to consider in times like this the nature of the arrangements. You used the phrase” the mandate is over”, but I think what we are looking at is the conclusion of a very successful program PRGFF. And, of course, in every country at those moments it is the time to reconsider what the engagement with the IMF will be to clearly economic factors such as international financial crisis are likely to factor in such a discussion but for us the Government in well-placed to take a decision and I think they are well aware of the international situation but also of their needs in terms of going to the market and in terms of macroeconomic stability. Journalist:
9. Another final question. There is uncertainty about the economic growth in 2009. Mrs. Nuamah:
2008 or 2009? Yes, of course, there is an uncertainty in every country about its rate of growth in 2009. In moments like this looking at the past performance is not necessarily the best predictor of the future. So I think what’s very important is to stay closely to the leading indicators there several that are used by the Ministry of Finance, the Bank of Albania and the INSTAT and there are regular publications. Close monitoring of these indicators is the only thing that is going to help reduce the uncertainty. But in the Bank’s view it is without doubt that 2009 will be more difficult in terms of growth, but, that said, as I mentioned before Albania has very high growth rates. And we confident that adjustments in Albania will be moderated by good policy, by a strong tradition of macroeconomic management and what we see as a robust economic performance. Mrs. Nuamah:
Thank you.
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