Albania: the Path to Nominal (Economic) Convergence

Abstract

The European integration process has, for more than two decades, represented an important issue for Albania. This process has been evolving gradually and Albania received the “candidate country” status in June 2014. The next step involves the EU membership, subject to the Copenhagen criteria fulfillment: economic, political and acquis communautaire. Upon fulfillment and granting the “member state” status, the following step would encompass the Economic and Monetary Union (EMU) and introduction of the euro. The latter is related to the Maastricht criteria fulfillment or nominal convergence criteria. Thus, the main objective of this paper is to assess the nominal (economic) convergence of Albania in terms of price stability, exchange rate stability, fiscal criteria and long term interest rate criteria. We will assess how macroeconomic indicators comply with Maastricht criteria requirements as by the end of 2014. Simultaneously, we explore the methodological harmonization degree of the macroeconomic indicators and thus their effective comparability to those of EU. Although Albania is not required to make nominal convergence assessments, this analysis turns to be useful in order to understand the starting position of the Albanian economy, identify areas where progress is still needed and the pursuit of necessary macroeconomic policies aiming to attain a favorable starting position for EMU and ERM II participation. Our main finding is that despite not meeting the Maastricht criteria for 2014, Albania is following the right path toward full effective European integration.