Obstacles to economic reform in Albania

Abstract

THE ALBANIAN ECONOMY is in a grave crisis.' The major patterns are the combination of high inflation and extreme budgetary and external imbalances and a sharp fall in GDP, together with distorted economic structures. The macroeconomic disequilibria, similarly to other Central and East European countries, are mostly generated by structural causes. However, especially damaging to Albania was the isolation of the country from the rest of the world after the break in relations with China in 1978. From that time onwards, autarchy was adopted, together with stalinist economic ideology, to use Adi Schnytzer's correct terminology (Schnytzer, 1982). From the early 1970s the paranoid Albanian leader, Enver Hoxha, had declared that 'we are going to build socialism based on our own forces', a principle which was even written into the 1976 Constitution. The same document banned all sorts of foreign investment and credits, with subsequent disastrous effects on the country's ability to renovate its outdated industries.2 In the past decade Albania's foreign trade as a proportion of national income was only 5%. Basically the country remained a raw material exporter and intermediate goods and spare parts importer; these accounted for approximately 70% of total imports. The economy's seclusion created no room for possible consistent economic manoeuvre.