Revenues have recorded a slight rise related to the previous months, while there is noticed a reduction in realised expenditure pace. In annual terms, during the first nine months of the year the budget revenues have recorded a growth of 6 percent, whereas the budget spending has increased by 22 percent. The budget deficit remains at comparably high historical levels, but within the budget limits reviewed lately. To a great extent, this deficit reflects the high level of public capital expenditures during 2009. Public expenditures and fiscal policy have provided a tangible contribution to the maintaining of the economic activity along this period, but they have been associated with increased pressures over the money markets. The Bank of Albania considers that the fiscal policy should continue to be prudent towards these balances in the future, and should take into consideration the long-term fiscal stability while drafting and implementing mid-term and long-term budget plans. External trade was featured by weakening in the trade volume during the first nine months of the year. However, trade exchanges value recorded during September is the highest recorded since 2009. After about three months of constant narrowing, the trade deficit enlarged during this month by about 9 percent in annual terms. Exports dropped by about 18 percent in annual terms, though the lek’s weak position vis-à-vis the Euro is a favourable factor for exports. Imports recorded positive growth rates for the first time since January of the current year.
Early on during the COVID-19 crisis, several macroeconomists including Martin Eichenbaum and Jason Furman recognised that the global pandemic was imposing an unfamiliar mix of shocks. It was not simply that the pandemic lowered aggregate supply by making workers ill, or that mobility restrictions reduced demand from private consumption. Instead, dynamic interactions between the supply and demand disturbances were causing discontinuous shifts. 5 The current spate of inflationary shocks, including those catalysed by geopolitical events in February, has also highlighted that the supply side can be pertinent for business cycle gyrations, alongside the more commonly-recognised aggregate demand fluctuations. Supply-side factors can no longer be regarded as low-frequency phenomena relevant only as determinants of long-term growth. Rather, in a globalised world, shocks in one jurisdiction can lead to gridlock in production via supply chain linkages, leading to short-term effects on growth and inflation in other economies. These coordination failures within and across industries, are most relevant today. 6 Second, once the nature of the shock is properly characterised, the appropriate policy response needs to be brought to bear. Policies clearly need to be carefully fashioned. Traditional fiscal pump-priming was not appropriate for dealing with strict lockdowns during the pandemic, while tighter monetary policy would not directly alleviate supplyside, cost-push, inflationary pressures. Complicating the picture, when multiple types of shocks are in play, coordination across different policy instruments becomes imperative.