Public Debt and Impact on the Economy: The Case of Albania

Abstract

The purpose of this article is to highlight the effect of public debt on the economy, and whether high budget deficits constitute a real threat to the economy. In general, governments refer to debt in order to cover the budget deficit or to realize the promised objectives and programs. It is not right to say that this or that government performed well or bad, just by referring to the debt figures, but must seeing it in relation to GDP growth, so the continuous increase in debt from one year to year is not a problem if the rates of GDP growth are much higher than the growth rates of the public budget. The government should pay attention of maintaining the balance between the sustainable growth of consumption maximization with the positive public debt, under these conditions we cannot say that today's debt is tomorrow's tax as debt and GDP can grow simultaneously. The methodology of this study consists in using the secondary data method, referring to different authors, statistics of state institutions and as well as non-state organizations. The government has impact on the dynamics of the economy in addition to others through its budget deficit and debt policies. Albania has a public debt of about 80% of GDP (acording to the latest report of the European Commission), while the economy is growing at a low rate, the government must take action to reduce the percentage of public debt to GDP, and to do that government should tray to stabilized GDP growth than intendet to reduce the debt. This is mainly achieved by stimulating the priority sectors of the economy, as well as by increasing the percentage of the expenditure on innovation and encouraging new enterprises, giving importance to the startups as well. The stability of the fiscal system makes it possible among other things to achieve the debt objectives on the other hand the correct use of the debt leads to the efficiency of Public Finances as well as in the efficiency of the country's economy.

Received: 12 October 2023 / Accepted: 14 November 2023 / Published: 23 November 2023