Public debt and Economic Growth, Case of Albania

• Author: Fatbardha Kadiu
• Position: University of 'Aleksander Moisiu' Durres, Department of Public Administration
• Pages: 457-460

ISSN 2410-759X Balkan Journal of Interdisciplinary Research Vol 1 No 1

Acces online at www.iipccl.org IIPCCL Publishing, Tirana-Albania May 2015

457

Public debt and Economic Growth, Case of Albania

Dr. Fatbardha Kadiu

University of “Aleksander Moisiu” Durres

Department of Public Administration

Abstract

Aer many debates in the recent days about the considerable increase of public debt in Albania,

mainly aer the change in law where as borrowing from third parties won’t be necessary to pass

through the parliament, there exist many comments if the debt caused positive or negative eects

on the economic development of our country. e purpose of this paper is to determine if there

exist a correlation between economic growth, where the economic growth will be considered as

the increase in GDP, and the public debt. rough this paper I will tend to dene an economic

model which can eect positively on the economic growth of our country. e results of the linear

correlation model of GDP for a period of time 1991 – 2012 as a dependent variable and the public

debt as an independent variable on the same period of time.

Key words: Public debt, Economic growth, Gross Domestic Product .

Introduction

From the global crisis now the government debt is a top priority for many countries. Not

only Albania but even Europe Commission is reconsidering the limit of government debt

as a percentage of GDP. Our budget is already suering from a considerable increase of

the government debt aer the government expenditure on the Durres-Morine road.

ere are many factors that eect the economic development of a country in dierent

directions as: scal policy, government expenditure, monetary policy, foreign direct

investments international trade agreements etc.

Despite all this the economic development in long run remains a variable that depends

on government budget debt. As we now new low scal policy is not a free lunch (National

Tax Journal, March 1999, 113-28). e eect of recent scal policy in Albania was the

rate on 10% in revenue taxes. On the other hand the need for government to build high

standard infrastructure made for the decision makers a tough choice. e last statistics

of government debt reaches 59.3 % of the GDP in Albania. Even it is within the limit of

European Commission Standards (60% OF THE GDP) any economist and citizen known

that this is a burden in the future period. e government debts in this paper refer to

the public guaranteed debt. It includes the long-term obligations of public debtors as

national government, public agencies, autonomous public bodies or private debtors that

are guaranteed by public entity.

Methodology

In order to determine the impact of government debt upon the economic growth we

used GDP data for 1991 to 2012 and the same interval for the economic growth. e

approach was to determine not the rate of government rate from year to year but the