Gjokutaj: The consequence of US tariffs will be increased inflation

Economic expert and analyst at the "Altax" company in Tirana, Eduart Gjokutaj, told Kosovo Online that the costs that will rise in the supply chain from countries affected by US tariffs will impact the economies of the region that are dependent on imports. As he points out, Albania, and even more so Kosovo, are not net exporters but net importers.

"Countries affected by tariffs will take measures to protect their economies by introducing additional tariffs or taking other steps. The shock 'waves' in this case are like waves formed in a pond. The greater the impact, the wider the effect spreads. Albania, as a country with a good position and economic capacity, should act in a way that, on one hand, minimizes the effects of the impact, and on the other, takes advantage of the whole situation, which has both negative and positive sides," Gjokutaj states.

The negative effect, he says, will be inflation, since price increases are expected, even for speculative reasons, which will affect Albania’s imports.

"Our country imports energy sources like fuel, and even electricity during certain times of the year when there is no rainfall. We also import raw materials for the construction and processing industries, as well as food and other everyday goods. On the other hand, Albanian exports consist mainly of minerals, electricity, construction materials, mostly cement, and some agricultural products, and these will be affected because demand will decrease. The markets where we sell will have less capacity to purchase Albanian goods. Let’s not forget that we are no longer talking about competitiveness, because geoeconomics has changed. Now we are talking about self-defense," the analyst says.

He adds that the current situation is no longer the same as it was after the coronavirus pandemic or at the beginning of the war in Ukraine. Rather, the global situation could harm Albania in many ways.

"Albania should have had a more proactive approach at the end of the coronavirus pandemic, when many opportunities arose as a result of the withdrawal of many industrial enterprises from developed countries out of China and other countries seen as threats to national security. Albania should have benefited due to its position, but that did not happen, or so little was done that it is negligible. All of this puts us in a very unfavorable position," Gjokutaj believes.

Inflation in Albania, he estimates, will reach the level it had after the war in Ukraine began.

"We cannot predict with absolute accuracy, because the dynamics of trade relations may change, but in general, inflation tends to rise even more than at that time, because this situation affects the entire spectrum of trade, all goods. Our country has not conducted proper economic policy. Albania did not know how to take advantage of the devaluation of strong currencies (euro, dollar) to reduce costs and help domestic producers. Albania or other countries in the region that depend on imports, such as Kosovo, must act quickly to diversify their economic base. They should focus on domestic production, giving priority to those sectors of the economy with the fastest export potential," our interlocutor points out.

He also adds that it is necessary to analyze what shortages will appear on the European market or with other partners.

"On the other hand, financial assistance should be provided to weaker or more vulnerable sectors of the economy through subsidies and fiscal stimulus policies. This must be done to ease the pressure that will fall on the budget. The budget will likely need to be revised or have a plan B to cope with the worst-case scenario. We must anticipate a pessimistic scenario and a liberal scenario, because in this case, there is no room for optimism," Gjokutaj concludes.