Speech of Minister Ahmetaj at the meeting with journalists:
After the successful issuance of the Eurobond I thought we would do a return to the economic events of this year and meanwhile, even after the summer of 2018 we did not meet to talk about the economic performance.
As for the Eurobond, compared to the two previous issues, is the lowest interest rate, with a 3.5% coupon, with a higher maturity, worth as the benchmark refers to about 500m euros. Targeted European market and American market. The composition of investors was much more qualitative and was accompanied by liability management, which is the first time that the Ministry of Finance in the international market does what is technically called “liability management”, ie the management of obligations in favor of risk reduction, whether in terms of of the amounts for 2020, either in terms of rising potency interests, such as signals in international capital markets, due to changes in key interest rates by the US Federal Bank, and of course the recent movements in the European market,
I want to quickly refer to some of the positive effects of the Eurobond for 2018. Over the next seven years, potentially, due to buyback, about 37.5 million euros, combined with the new emission, and I would not never forget the effect that buying / issuing in the international market will make to the domestic market. As I have said, we will be managing liabilities and the internal market, which means that the government will withdraw to a certain extent and from the domestic market, to allow for the extension of lending to the private sector. So, the day-to-day and bank positions do not primarily engage the government but engage the private market. This will, of course, lead to the reduction of interests in the domestic market, whether of treasury bills or potentially credit, due to the withdrawal we are doing and will do.
Meanwhile, just to remind you of where we are today with the region. We take many things as a basis and as guaranteed, as if things happen because that should happen. Beyond all that the Albanian economy has done three days ago, the presentation on the international market is behind reforms. In the graph I have presented, it is shown that if all three countries of the region were to come together at the same time, at the moment we are talking, so are the coupon prices, the interest each country would receive, referring to either risk premiums, or coupon trading at that moment.
So even though we have a debt higher than Macedonia, though we owe debt higher than Montenegro, though Macedonia is in the BB rating, we have managed to issue a cheaper coupon. It has absolutely no other interpretation than the trust that investors have and we are talking about investors, in the sense of doing a cold business. We are not talking that these are relations between countries where Berlin, Rome, Vienna and Brussels are helping Albania. No, it’s not this lane. Here we are talking about cold financial markets to scan coldly and to look at the truth.
Coupon 3.5% is not just a figure, 7-year maturity is not just a time but is a reflection of the trust the investors have in the Albanian economy. Imagine that important investors are holding on their Eurobond property of Albania. So, investors in European developed countries have so much confidence in the Albanian economy, in the reforms of Albania, that have decided to keep their future there, on Albania’s Eurobond treasury bills. This has come only because of the reforms.
Throughout my 8-day presentation at international financial centers, Albania’s history was a positive story. So we expected much attention and respect for the reforms we have made. It was also a call that the necessity of continuing the reforms is non-negotiable. Reducing public debt is a national necessity and task. Reducing public debt is a national duty until we bring it 45%. Fiscal consolidation will continue. It was at the spotlight of investors.
Reforms will continue. They are at the center of the investors’ attention and I would humbly pray to you and the citizens, as long as you have the pen and speech instrument, that in the final Albania after all those painful reforms, deep but necessary, has become a normal place where the name of Albania is a normal name in the mind and the attention of investors, cold or colored, the Albanian economy is a normal economy, its structural problems, its financial problems, but one an economy that grows by 4% and I believe it will reflect very well and attract foreign investment in Albania.
Meanwhile, no later than yesterday, but I believe we did not need to be confirmed, although satisfaction is when we are confirmed by an international institution like the World Bank, economic growth has gone up to 4.3%. Talking enough or not enough is the most worthwhile discussion to be made, but remember that a moment of reflection is indispensable. Years ago was not even 1%, today it is 4.5% and 4.3%. The forecast is going up to 4.3 for the next year, and I believe it has started to feel in the citizens as well. Certainly no home can be done for a day. No place can be given for a mandate. The turn of Albania in 4 years because of government reforms Rama only shows one thing, will political commitment and determination to make bold reforms because in the final, if we do the right thing, as we did,
In this year we have the opportunity to be the country with the highest growth in the region and you can see how we have gone over the forecasts made by the World Bank in terms of economic growth.
Economic growth in the second quarter is above the annual forecast level. As you can see, we are moving towards 4.2% at the end of this year. Anyhow, it remains to be seen in continuity. Energy has been one of the contributors, but we have a consolidated contribution to services and industry. So, we are diversifying into the sources of economic growth and fortunately left behind the time when growth was not associated with employment.
Even in the World Bank report, Albania is referred to as a distinguished performer compared to the countries in the region in terms of the labor market. What is important, if some countries have lowered their employment by decreasing their participation in the labor force, of course not, of course, do not forget that this is very qualitative for the country, Albania has not only increased its participation in labor force, but has declined and unemployment at historical record levels of 12.3%. Unemployment has never been lower than that.
I understand very well that many citizens, as they normally and legitimately do in social networks, will begin to say “where are the jobs ?!” 234 thousand new jobs. 52% has increased employment since 2013. Of course there is a lot to do but let’s not forget, it is worth reflecting that there were 450,000 jobs in September 2013 and today there are 684,000 and 200 new jobs. Which means that fortunately, the quality of underlying growth has changed and industry and services, together with energy, are important motorbikes that pulsate very strongly.
I have also provided a slide in terms of stimulating job creation. As you can see, the employment rate for the population aged 15-64 is 59.2%. The number of employees increases by 3%. The official unemployment rate is 15 years and up 12.4%, which is actually the lowest historical. I do not say this at all to boast that in a country like Albania, I do not believe that we have the luxury to boast of any kind of achievement of any kind because the struggle with poverty continues, because it is out there beyond these walls at least 76 thousand citizens and registered citizens as unemployed who need work and more than that in all of Albania who, though not enrolled, need to be employed. The numbers are official. You can check it through the Tax Duties, where there are nearly 234,
We will start debating on salaries, value added, very soon. Albanians need to be paid more, linked to productivity, of course, because nothing comes artificially. But the next debate will start with the quality of the salary.
The growth of the average wage continues to increase. I’ve got a quotation from the World Bank report. As you can see, we continuously increase the average salary for an employee.
I have brought the final consumption of the population, which means a lot and are 12 consecutive quarters that consumption increases. It is a consequence of an increase in the economy and increase of the income of the citizens.
The latest survey published by INSTAT, among other things, speaks of the narrowing of inequality, referring to the growth rate of household consumption in various categories, with high or lower income.
Meanwhile, this slide was not taken by either the Prime Minister or the Ministry of Finance, but I received it from the World Bank report yesterday. Reducing poverty. Is there endless and endless space more? Certainly, but this slide shows that our economic policies have gone in the right direction. Poverty can not be one day and trying to blur the poor. Poverty is fought with reforms and this graph needs a reflection of political forces as well. Reducing poverty is not a boon for a government. Reducing poverty is the goal in itself of all political forces, the government itself, Rama 1, Rama 2, and Rama 3, and here we can prove what it means to make bold reforms to get out of here one day and telling the Albanians that this country is continuing, goes into the abyss.
Do you remember what the Prime Minister said in 2013, the day he took office? Back we have a pit, forward we have a rock. What was the path? The only way was the path of reform. Here is the reference, here is the cosiness, here is the achievement, the reduction of poverty. I am convinced that citizens will say “Yes Albania has poverty in Tirana, Durrës, Librazhd”. Of course there is. The struggle with poverty is neither a day nor a year. The base we started is low and what we have to do is even bigger. But we need to reflect on the truth.
With regard to the inflows of direct investment, have you ever heard of it in parliament? I’m convinced you switch from parliament to multiplier then. Discuss “no investor left, investors did not come”. Here’s the figures and the figures are 6 months for 6 months, 28% higher, 2018-2017. I’m not going to Statkraft, not ending TAP. Both are completing the investment phases. But what has brought growth? Manufacturing, tourism, and therefore utilities, industry. Do you know we do not say enough, but should we say more about reactivating the mineral processing industry? Do you remember when they boasted chrome for breath and elaborate ferrochrome? Do you remember leaving this industry? Well, come back today, there are two processing factories where the added value in Albania, compared with a crude ore and an elaborate ferrochrome,
As far as inflation is concerned, we remain on those levels. I am not here to judge the Bank of Albania, but I believe that the work of the Bank of Albania is very much appreciated either in terms of lowering bad credit or in terms of monitoring the financial system that is stable in terms of inflation.
Have you heard in the multiplier filmprogram that “businesses went away, business was shut down, businesses broke down, shreds” in a sad, romantic way? Here’s the number of derecognised, registered businesses and net number. Verifiable. It is not a romantic figure, nor a fancy romantic figure, these are business registers. There have been created 14,929 new businesses, have been derecognised in economic normality 5572 businesses. January – September 9357 new net businesses and I believe that it will go at least 12 thousand net. This is the truth we hear about businesses.
For the first time I’ve brought a figure that I believe says so much, business profit, and here I’ve removed public companies that someone might say to me that “you’ve calculated public companies here and one day it rains, one day it’s snowing, one day it’s drought “. I’ve removed public companies. In 2017, company profits have increased by 16.7 billion, so companies in Albania, except public companies, 167 million more than 1 year ago. As you can see, this speaks too much.
Meanwhile, in terms of tourism, in August 2018, the number of foreign nationals entering the country is 1,449,952, ie August 2018, in August 2017, a 26.9% increase. The number of foreign nationals entering our country in 8 months has gone 4 million 397 thousand, almost 17% increase, 2 digit increase. If the number of tourists continues to grow by two digits, in 2022 we expect 10 million tourists and the voice of services generally related to tourism expanded by 785 million euros or 8.7% more from the same period of the year passed.
Foreign trade – exports are growing at two-digit levels, imports (machinery and equipment) at 7.8% and imports in total by 4%. Exports are diversified, which is very healthy, but not yet sufficiently diversified. Do you remember when we spoke 4 years ago? We have said that one of the risks of the economy is the gamma and the narrow export dissociation. Now, we are going to another stage. We are still far from saying that we have passed the fragile cycle, we are certainly in a fragile cycle, but we are in the right direction.
In terms of revenue performance we have a 4.2% increase. I want to share with you, which is about 6 billion shocks from the lek appreciation, but the time continues to grow. With regard to employment, there are 37 thousand vacancies registered, over 17 thousand jobs have been made by the Employment Offices through mediation and by the end of this year the target is 25 thousand.
Before talking about the fiscal package, I want to tell you that whatever the budget and package of 2019 is the direct consequence of what the Prime Minister said: reforms are painful, difficult, but necessary. The increase in wages we are planning on next year’s budget for teachers, doctors, and military; solidarity package; baby bonus that has never been done at those levels, to promote demographic growth and definitely help the family in those moments when a child comes to life; free books; progressive tax; inclusion in universal health care even those who are uninsured; increasing administration salaries again. All of these are the consequences of the reforms. When we make the balance, a government like ours certainly does not have the luxury to boast of achievements but a reflection we need to do. Because of the reforms we passed all the difficult moments that left us at the expense of those who today do what they do, the former government, the opposition today!
Regarding the fiscal package, without going into much detail, will be affected the law “On Income Tax”, there will be an increase of the salary limit that is taxed by 23% from 130 thousand to 150 thousand, so will be reduced taxes 15,400 employees. The dividend will decrease, and we will include anti-avoidance provisions for non-residents’ non-capital gains, but details later.
As far as the national tax is concerned, we have had a demand from the plastic packing taxation industry and are finally able to relax that industry and tax more rationally. Since we want the further development of the domestic processing industry, we have proposed an increase in mining rent for chrome exports from 6 to 9, and of course they are for thought.
Regarding excise, we have some adjustments. The value added tax has some significant reductions, a reduced VAT rate for the import of electric buses. We are starting to think rationally even in the lane for the environment.
These are generally elements of the package that will be continually detailed by the government and I believe we will have a discussion with the parliament as well.