TAP on track to start Adriatic offshore section

TAP on track to start Adriatic offshore section

TIRANA, Aug. 10 – The Trans Adriatic Pipeline consortium has already completed half of its Albania onshore route works and is on track to start its offshore section across the Adriatic to Italy next year. Shkelqim Bozgo, the TAP country

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Albania makes new emergency costly electricity imports

Albania makes new emergency costly electricity imports

TIRANA, Aug. 10 – As the country faces one of its worst droughts in decades, paralyzing hydro-dependent domestic electricity generation, the Albanian authorities were forced to make new emergency purchases this week due to increased demand from the peak tourist

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Gov’t to borrow €45 mln in Euro-denominated notes

Gov’t to borrow €45 mln in Euro-denominated notes

TIRANA, Aug. 10 – The Albanian government is planning to borrow €45 million in two-year Euro-denominated notes from the local market in mid-August, in the second auction of this kind for this year. The August 17 auction comes at a

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Climate change effects threaten domestic hydro-dependent electricity production

Climate change effects threaten domestic hydro-dependent electricity production

TIRANA, Aug. 9 – Climate change effects will have a negative impact on Albania’s energy security in the next decade unless the country diversifies its current wholly hydro-dependent domestic electricity generation. In its 2017-2027 strategy on integrated water resources management,

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Campaign against informality was a failure, tax evasion remains pervasive, study shows

Campaign against informality was a failure, tax evasion remains pervasive, study shows

TIRANA, Aug. 8 – The late 2015 nationwide campaign that the ruling Socialist Party undertook contributed to the deterioration of the business climate in Albania, a regional study examining tax evasion in Albania, Macedonia and Kosovo has found. Launched in

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Banks’ profits surge as credit struggles to recover

Banks’ profits surge as credit struggles to recover

TIRANA, Aug. 7 – Albania’s commercial banks posted record high profits in the first half of this year as non-performing loans hit a 6-year low fuelled by the ongoing write-off of bad debt. Central bank data shows the 16-overwhelmingly foreign-owned

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Moody’s, S&P maintain stable outlook on Albania

Moody’s, S&P maintain stable outlook on Albania

TIRANA, Aug. 7 – Two of the leading global rating agencies, Moody’s and Standard & Poor’s, have reconfirmed Albania’s stable outlook, citing ongoing consolidation and maintenance of fiscal discipline ahead of the June 25 general elections. In its latest rating

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Central bank expects national currency strengthening to come to an end

Central bank expects national currency strengthening to come to an end

TIRANA, August 3 – Albania’s central bank expects the negative effects that the strengthening of the national currency is having to gradually wane as the economy continues recovering mainly driven by some major energy-related investment, a recovery in exports and

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Watchdog unveils record €375 million abuse by gambling authorities

Watchdog unveils record €375 million abuse by gambling authorities

TIRANA, Aug. 3 – Albania’s Supreme State Audit has identified record high abuses in the country’s gambling sector in the past three years as a result of the authorities’ failure to impose and collect informality-related penalties. In a report on

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Banks worried over hike in informal lending as demand for new loans drops

Banks worried over hike in informal lending as demand for new loans drops

TIRANA, Aug. 1 – Commercial banks have identified a rise in informal borrowing by both businesses and households as a key concern for poor demand for new loans. The alarm comes as credit officially stands at negative growth rates and

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                    [post_content] => TIRANA, Aug. 10 - The Trans Adriatic Pipeline consortium has already completed half of its Albania onshore route works and is on track to start its offshore section across the Adriatic to Italy next year.

Shkelqim Bozgo, the TAP country manager for Albania, says the pipeline scheduled to bring Caspian gas to Europe is already in its peak construction stage and is expected to inject about Euro 800 million in foreign direct investment in the next couple of years.

"TAP's total value, starting from 2016, but even earlier, until the completion of operations is at about Euro 1.5 billion. Of course, 2017 and 2018 are the project's most intensive years and the investment level in each of these years will be at about Euro 400 million," Bozgo has told a national Albanian TV.

The amount of TAP's annual investment represents about 4 percent of Albania’s GDP and 40 percent of total annual FDI inflows.

"The offshore section starts in 2018 and lasts for several months. It's the easiest part because of technological development. The project is expected to be tested and commissioned in 2019," Bozgo adds.

TAP which is expected to bring gas to Europe through Greece, Albania and Italy is generating one of the country’s largest foreign direct projects, with important benefits for a number of industries, including manufacturing, utilities and transport.

Experts have described TAP as an opportunity that would benefit Albania both economically and politically, making the country an important hub of the international gas pipeline for the Western Balkans.

The pipeline in Albania will be approximately 211 km long, starting at the Korça region, southeastern Albania on the border with Greece.

About 13,000 pipes of mostly 18 metres are being used for the Albanian section of TAP, which also includes a 37 km offshore section in the Albanian part of the Adriatic linking it to southern Italy.

With construction works already in their peak stage, TAP’s first gas deliveries to Europe are targeted by early 2020.
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                    [post_content] => TIRANA, Aug. 10 - As the country faces one of its worst droughts in decades, paralyzing hydro-dependent domestic electricity generation, the Albanian authorities were forced to make new emergency purchases this week due to increased demand from the peak tourist season.

State-run OSHEE electricity operator managed to secure with difficulty an amount of 24,000 MWh for August 12 to 31 out of an initially planned 35,200 MWh due to low supply and unfavorable prices.

The electricity purchases cost the Albanian government about €1.68 million, at an average price of €70/MWh, about €1 higher compared to the late July auction, registering one of the highest prices in the past decade.

In late July, OSHEE distribution operator purchased 434,000 MWh of electricity for the whole of August 2017 for a total amount of €29.9 million at an average price of €69/MWh.

The OSHEE will secure its electricity from Slovenian, Serbian and Albanian operators through the Serbia-Montenegro, Greece-Albania interconnection line. Part of the electricity was also secured by Devoll Hydropower, the Albanian subsidiary of Norway’s Statkraft which has already made operational its first Albanian hydropower plant and is working to build a second bigger HPP by 2018.

Costly electricity imports have cost the Albanian government about €53 million for the past 2 months, affecting planned investment in the poor condition distribution grid.

Electricity imports are expected to cost the state budget some other dozens of millions of Euros in the next few months unless heavy rainfall fill up the empty reservoirs of the big hydropower plants.

Currently, about 80 percent of the country's electricity needs are being met through costly imports, unveiling the need for the diversification of electricity resources to avoid adverse weather situations like this year.

 
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                    [post_content] => TIRANA, Aug. 10 - The Albanian government is planning to borrow €45 million in two-year Euro-denominated notes from the local market in mid-August, in the second auction of this kind for this year.

The August 17 auction comes at a time when abundant Euro supply in the local market because of FDI, inflows, tourism income and apparent illegal cannabis cultivation and sales, have led to Europe’s single currency trading at an 8-year low against the Albanian with a negative impact on exports.

The auction also comes at a time when the country’s commercial banks hold significant liquidity in Euro as Euro-denominated deposits account for about a half and lending in Europe’s single currency, currently accounting for about 40 percent, has waned due to poor demand and foreign exchange risks.

With Euro trading at 132.39 lek, down 2.6 percent compared to the same period last year, the Albanian government is expected to benefit from euro’s depreciation and ample market supply.

The Albanian government has held only one Euro-denominated auction this year, in line with the central bank’s de-euroisation initiative to discourage savings and credit in Europe’s single currency currently accounting for half of total deposits and loans in a bid to improve the transmission of its easier monetary policy.

The Albanian government borrowed about €40 million in 2-year Euro-denominated notes in January 2017 at a 0.8 percent yield.

Yields on government securities have almost remained unchanged in the past four months following sharp fluctuations between mid-2016 and early 2017.

The situation comes at a time when the key interest rate has been held at a historic low of 1.25 percent for more than a year and credit is struggling to return to positive growth rates amid high level of non-performing loans and poor demand by both businesses and households.

Central bank data shows yields on 12-month T-bills, the government’s key instrument for internal borrowing, have remained stable at about 2 percent since late March, down from 3.22 in late December 2016, following a gradual upward trend after hitting a historic low of 1.24 percent in mid-2016.

Domestic debt accounted for slightly more than half of Albania’s 67 percent of the GDP public debt at the end of the first half of this year when the banking system held about two-thirds of it.
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                    [post_content] => TIRANA, Aug. 9 - Climate change effects will have a negative impact on Albania's energy security in the next decade unless the country diversifies its current wholly hydro-dependent domestic electricity generation.

In its 2017-2027 strategy on integrated water resources management, the Albanian agriculture ministry warns water flows in the country’s main rivers could drop by up to 20 percent in the next decade as a result of lower rainfall.

“The expected climate change effects show that water flows in the Drin, Mat and Vjosa rivers will drop between 4.5 percent to 20 percent by 2027. Underground water levels are also expected to drop, with the area along the Adriatic coastline suffering the biggest losses. It is expected that a slight increase in sea water level will affect the sweet water aquifers through the flow of saline water and the flooding of river deltas and coastal lagoons,” says the strategy.

Citing a World Bank report, the strategy drafted by UK-based Mott MacDonald consultant, expects electricity production from big and small HPPs in Albania to drop by 15 percent and 20 percent respectively because of a 20 percent drop in summer rainfall until 2050.

Electricity production in big hydropower plants is dependent on rainfall filling reservoirs, while production from small HPPs depends on the volume of river water flows.

Low levels of snowfall and its quick melting due to global warming effects have cut the operation period for small HPPs to 4 months from a previous 8 months.

With the country facing one of its worst droughts in decades, Albania is currently meeting the overwhelming majority of about 80 percent of its electricity needs through costly imports. State-run operators have already spent some €53 million in electricity imports for the past 2 months. Electricity imports are expected to cost the state budget some other dozens of millions of Euros in the next few months unless heavy rainfall fill up the empty reservoirs of the big hydropower plants.

Domestic electricity production by state-run hydropower plants in the northern Drin River Cascade has almost been paralyzed due lack of rainfall for the past three months and water levels at an almost historic low. The three state-run HPPs in the Drin Cascade produce about three quarters of domestic electricity generation while the rest is produced by more than 100 private and concession HPPs, making Albania’s wholly hydro-dependent electricity sector vulnerable to adverse weather conditions such as this year’s prolonged drought.

The Vlora thermal power plant and the launch of the Albania-Kosovo interconnection line are Albania’s sole hopes of diversifying the country’s power sources in the next few years.

The Vlora thermal power plant, a costly debt-financed investment of $112 million has not been put to use since 2010 when it was finished due to high costs of operating on fuel and problems with its cooling system.

The launch of the Trans Adriatic Pipeline and its first gas flows by 2020 are expected to make the costly thermal power plant operational and increase the country’s energy security.

Meanwhile, a Kosovo-Serbia dispute over the ownership of transmission assets in Kosovo territory has been holding back a newly built 400 kV interconnection line between Albania and Kosovo for more than a year, with negative effects on plans to create a common regional market and missed earning in both countries.

“Water is a strategic resource for Albania. Although rich in water resources with eight rivers and three big navigable and cross border lakes, a big number of important wetlands and abundant underwater resources, the country will face climate change effects accompanied by an increase in temperatures and a decrease in precipitation which will lead to milder winters, warmer springs and drier and hotter summer and autumn. Water resources are expected to drop by 14 percent until 2050,” says the water resources strategy.

Experts say changes in the precipitation regime will lead to heavy rainfall coupled with early snow melting caused by higher spring temperatures and trigger more frequent floods.

The population growth, economic development and competition on water resources will put extra pressure.

The expected increase in flash floods along with the quick snow melting because of higher winter temperatures could be a threat to dam security, making the nearby communities and areas exposed to floods and possible discharges from the hydropower reservoirs.

The report also warns that two-thirds of Albania's dams, 410 out of 626, are in urgent need of repair to increase their security and availability of irrigation water.

The rise in temperature and droughts will also lead to losses of woods and negatively affect water quality.

An earlier World Bank report has warned that agriculture is one of the most climate-sensitive of all economic sectors in Albania, and without a clear plan for aligning agricultural policies with climate change, the livelihoods of rural populations will be at risk.

“The rural poor will be disproportionately affected because of their greater dependence on agriculture, their relatively lower ability to adapt, and the high share of income they spend on food,” World Bank experts have warned.

Agriculture is a key sector of the Albanian economy employing about half of the country’s population, but producing only a fifth of the country’s GDP, unveiling its poor efficiency.

The UN has described climate change as one of the major global challenges.

“From shifting weather patterns that threaten food production, to rising sea levels that increase the risk of catastrophic flooding, the impacts of climate change are global in scope and unprecedented in scale. Without drastic action today, adapting to these impacts in the future will be more difficult and costly,” says the UN.
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                    [post_content] => TIRANA, Aug. 8 - The late 2015 nationwide campaign that the ruling Socialist Party undertook contributed to the deterioration of the business climate in Albania, a regional study examining tax evasion in Albania, Macedonia and Kosovo has found.

Launched in September 2015, the rather aggressive campaign mainly focused on small businesses formalized thousands of previously unregistered enterprises whose owners were forced to install cash registers and pay local taxes and social security and health insurance contributions.

The campaign accompanied by a huge increase in tax evasion fines failed to address large-scale evaders, known as the ‘big fish’ and secure the expected tax hike from the fight of tax evasion, estimated at about 30 percent of Albania’s GDP.

The campaign also has failed to produce the expected hike in government revenue also because of an earlier campaign to collect hundreds of millions of euros in accumulated unpaid electricity bills significantly affecting consumption levels among poor households and more than 100,000 people leaving the country in the past couple of years to seek asylum in EU member states, mainly Germany.

"Due to its intensity and stronger focus on smaller businesses, the campaign did not have the expected results and contributed to the deterioration of the business climate in the country," says the study examining hidden economies in the three neighboring Western Balkan countries.

The Tirana-based Institute for Democracy and Mediation, which examined the Albanian economy, says the approach of the Albanian tax authorities has currently changed "being more collaborative and mainly focused on smarter targeting through risk-based analyses."

The nationwide campaign was accompanied by some tough penalties and what the business community called repressive inspections, leading to legal battles with the government.

In early 2016, the country's Constitutional Court turned down a heavy fines law that increased fines on tax evasion by 50-fold to 10 million lek (about €75,000) as unconstitutional on “disproportionate” penalties to income and offences committed.

The court also later cancelled as incompatible some late 2015 legal changes that set reference wages on self-employed professionals increasing social security contributions by three times.

The regional study described the three small Western Balkan economies as hidden tax havens with the revenue to GDP ratios ranging between 27 to 29 percent of the GDP and failure to issue fiscal invoices on cash purchased goods and services ranging from 6 to 74 percent.

The 2016 survey shows Albania's economy is much more informal compared to neighbouring Macedonia, a country that applies the lowest tax burden in the Western Balkan region.

About half of respondents in Albania, some 43 percent, say they did not receive an invoice for goods purchased in the past couple of years.

The situation is most problematic with the purchase of clothes and shoes, cosmetic and hygiene as well as alcohol and tobacco products with half of the respondents saying that are rarely or never provided fiscal receipts.

When it comes to services, informality rates are alarming in all three countries ranging from 54 percent in Macedonia to 65 percent in Albania and 74 percent in Kosovo.

In Albania, fiscal receipts are most frequently given for catering and restaurant services (84 percent), transportation services (66 percent) and least frequently for household maintenance (6 percent), home repair (8 percent), renting assets and premises (11 percent) and senior and child care services (15 percent.

The same study conducted by regional NGOs has earlier unveiled high unemployment rates, especially among youngsters, is the key reason behind alarming levels of the shadow economy in Albania, Kosovo and Macedonia.

Whether it is a factory worker who also works as an unlicensed plumber, an electrician being paid in cash, an IT professional receiving an envelope wage, hidden salaries are the most acute concern in the three Western Balkan countries aspiring to join the EU, affecting about half of workers.

“Hidden salaries remain the most acute concern with the employment income being partially or completely undeclared for 36 percent of workers in Albania, 37 percent in Kosovo and 40 percent in Macedonia,” the study has unveiled.

The three neighboring countries have a total resident population of about 7 million, with ethnic Albanians in Kosovo accounting for 92 percent of its 1.9 million population and a quarter of Macedonia’s 2.1 million residents.

The conclusions come from a survey conducted in May-June 2016 with 1,100 respondents in each of the three neighbouring countries.

Albania's tax burden is significantly higher compared to neighbouring Macedonia and Kosovo who apply flat tax regimes of 10 percent.

Since 2014, the corporate income tax and the withholding tax on dividends, rents and capital gains have increased by 5 percent to 15 percent, making the tax burden in Albania one of the region’s highest and the key concern for the business community in the country.

Although making paying taxes easier by introducing a new online system for filing and paying taxes, businesses in Albania still need to make 34 payments a year and spend 261 hours a year on paying taxes, one of the region’s highest, according to the latest Doing Business report.

Albania climbed 32 steps to rank 58th among 190 global economies in the latest Doing Business report to score its best ever ranking, but yet lagged behind some of its key regional competitors offering lower taxes and easier procedures.
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                    [post_content] => TIRANA, Aug. 7 - Albania's commercial banks posted record high profits in the first half of this year as non-performing loans hit a 6-year low fuelled by the ongoing write-off of bad debt.

Central bank data shows the 16-overwhelmingly foreign-owned banks operating in Albania posted record high profits of 11.5 billion lek (€85.2 mln) in the first half of this year as non-performing loans hit a 6-year low of 15.58 percent. The downward trend in NPLs, following a record high of 25 percent in mid-2014, has been a result of an ongoing write-off of non-performing loans that have spent three years in the ‘loss’ category from banks balance sheets and loan restructuring with some big borrowers.

The banks’ profits surged at a time when lending is officially struggling to return to positive growth rates amid tight lending standards and poor demand for new loans, giving rise to a hike in informal borrowing.

Real credit is estimated to have grown by a modest 2 to 3 percent in the first half of this year, taking into account the write-off effect of non-performing loans, statistically keeping lending at negative growth rates.

Lending in the first half of this year, has mainly grown in the national currency, which now accounts for about 42 percent of total credit, compared to only about a quarter just before the onset of the global financial crisis in 2008. The situation unveils the country’s declining but still high euroization rate, a barrier preventing the transmission of the central bank’s easier monetary policy which has led the country’s central bank to undertake de-euroisation measures for next year.

Governor Gent Sejko says the de-euroisation strategy will discourage savings and credit in Europe’s single currency currently accounting for half of total deposits and loans in a gradual process to make the Albanian economy more competitive and prevent foreign exchange risks associated with the fluctuations of the national currency.

The banks’ record high profits also come at a time when deposit rates are close to zero, spending on provisioning against loss sharply dropped and net income from other activities mainly related to commission fees and foreign exchange operations increased.

Average loan rates in the national currency slightly rose to 7.5 percent in June 2017 and were up to 4.5 percent for loans denominated in Europe’s single currency. Meanwhile, deposit rates stand close to zero, reflecting historic low key interest rates applied by central banks.

By comparison, banks' profits during the first half of 2016 were at about 5 billion lek (€37.5 mln) and 8.3 billion lek (€61.5 mln) in the first half of 2015.

Back in the first half of 2009, soon after the outbreak of the global financial crisis, banks' net profits hit a record low of 660 million (€4.9 million) negatively affected by panic deposit withdrawals amid concern over the health of Greek bank subsidiaries in the country.

Bank of Albania data shows the 16 overwhelmingly foreign owned banks operating in Albania reported net profits of 9.27 billion lek (€68.5 million) in 2016, down 40 percent from a historic high of 15.7 billion lek (€116 mln) in 2015.

The Albanian banking system has been well-capitalized, liquid and profitable during the past eight years with the Albanian-owned assets increasing their share to 11.5 percent at the end of 2016.

 
                    [post_title] => Banks’ profits surge as credit struggles to recover
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                    [post_date] => 2017-08-07 14:51:45
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                    [post_content] => TIRANA, Aug. 7 - Two of the leading global rating agencies, Moody's and Standard & Poor’s, have reconfirmed Albania's stable outlook, citing ongoing consolidation and maintenance of fiscal discipline ahead of the June 25 general elections.

In its latest rating action, Moody's Investors Service reaffirmed Albania's B1 long-term foreign and local currency issuer ratings with a stable outlook.

“The decision to affirm Albania's credit rating takes into account the significant progress achieved in recent years in terms of fiscal consolidation and structural and institutional reforms. These support the current rating by helping to reverse the damage to the government's balance sheet caused by the financial crisis,” said Moody’s, one of the top three global rating agencies.

“However, offsetting these positive developments are a number of credit challenges that continue to weigh on the country's credit profile. These include the still high, albeit declining, debt burden, still large financing needs reliant on the banking system, and a small economy with a narrow export base,” Moody’s added.

Albania’s public debt hit a three-year low of 66.8 percent of the GDP at the end of the first half of this year, down from about 70 percent during the same period last year, also slightly reducing the country’s high debt servicing needs, according to the Albanian finance ministry.

The 2017 first half performance shows that the government is little likely to achieve its 63.3 percent debt target for this year despite tax income having performed well in contrast to the tradition of underperforming revenues in general or local election years. In addition, Albanian experts say bringing public debt to a more affordable 60 percent of the GDP target by 2020 would require further fiscal consolidation, tax hikes and tight spending, also affecting public investment considering the country’s projected growth of about 4 percent in the next three years.

Moody’s says Albania’s fiscal discipline has been maintained through this electoral cycle and expects the deficit to decline further in 2017-2018, supported by expenditure rationalization, reduced energy-related payments and a number of measures aimed at improving revenue collection, an area where Albania still lags behind its regional peers.

Moody's projects Albania's real GDP growth to accelerate slightly to 3.6 percent in 2017 and 3.8 percent in 2018 from 3.4 percent in 2016. The forecasts are slightly less optimistic compared to the Albanian government's projections of growth picking up to 3.8 percent and 4.1 percent in the next couple of years.

"Nevertheless, being a small and narrowly diversified economy, Albania remains exposed to external shocks, including adverse weather, given the importance of the agricultural sector and the country's reliance on hydroelectric resources. The latter continues to pose a risk, albeit a diminishing one, to economic growth and the fiscal position," warns Moody’s.

The prolonged drought Albania has been facing in the past three months has almost paralyzed the country’s wholly hydro-dependent domestic electricity generation, increasing reliance on costly electricity imports and with a negative impact on the agriculture sector lacking irrigation systems.

"Ongoing reforms in the energy sector and efforts to diversify the country's power supply through greater access to natural gas, with the Trans Adriatic Pipeline scheduled to begin operations in 2020, are expected to increase the country's economic resiliency to external shocks,” the rating agency says.

Moody’s warns downward pressure on the rating would arise from a reversal of the fiscal adjustment and a failure to stabilize the public debt to GDP ratio or from a reduced political commitment to the institutional and economic reform agenda. “Furthermore, emerging challenges in funding the current account deficit due to a significant decline of FDI would be credit negative.”

Upward pressure on the rating would likely only emerge in the event of developments which addressed at least two of Albania's key credit constraints: the small, and undiversified economy; the high public debt burden; and the country's weak institutions. “A material decline in public sector debt, and further advances in institutional building resulting in an improved business environment and competitiveness, would lead to upward rating pressure,” Moody’s says.

 

S&P

 Standard & Poor’s has also affirmed Albania's 'B+/B' long- and short-term sovereign credit ratings on Albania and the country’s stable outlook.

Obligations rated B are considered speculative and are subject to high credit risk. Both S&P’s B+ and Moody’s B1 ratings signify that the issuer or carrier is relatively stable with a moderate chance of default and that investors and policyholders of the rated entity are taking a low to medium risk.

"The stable outlook reflects our expectation that Albania will continue to gradually progress toward strengthening its institutional framework,  building up on the country's past cooperation with international institutions, such as the International Monetary Fund, and due to  preparatory efforts in the EU accession process," said S&P.

“The stable outlook reflects our expectation that the government of Albania will maintain its commitment to fiscal consolidation, particularly on the revenues side, supported by steady economic growth and the authorities' increased capability to enforce tax compliance,” says S&P.

“Lower risks associated with the country's gradually declining debt-to-GDP ratio will also help to reduce the government's interest bill as a share of government revenues. At the same time, the country will continue to strengthen its institutions ahead of the EU accession process, and we expect its external financing position will not deteriorate,” adds S&P.

The rating agency says it could raise the ratings if structural reforms established a stronger track record of more robust institutions and strengthened economic growth prospects. A positive action could also follow should ongoing fiscal consolidation efforts result in a faster-than-expected decrease in government debt.

“We could lower the ratings if we observed deterioration in government finances--for example, due to a significant deviation from our current forecast--alongside resumed constraints on borrowing conditions. We could also lower the ratings if we saw a marked deterioration in Albania's external position and ability to fund its high current account deficit,” S&P warns.

The rating agency says the formalized deficit brake, the "organic budget" law, and generally enhanced institutional oversight, helped to prevent the renewed accumulation of arrears and secured the country from a fiscal slippage ahead of this year's general elections.

“We expect that Albania, coming from a low base, will be able to generate solid economic growth rates of about 3.8 percent per year on average in real terms during 2017-2020. Growth will primarily stem from strong domestic demand, with rising consumption and private investment,” S&P says.

Economic development in 2017 will also benefit from two large investment projects in the energy sector, for which most of the construction will occur this year.

“Progress on the  Trans-Adriatic Pipeline (TAP), which will connect Albania with Italy and the Caspian Sea, appears on track, with completion expected by year-end 2018 and costing an estimated €1.5 billion,” says S&P.
                    [post_title] => Moody’s, S&P maintain stable outlook on Albania 
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                    [post_date] => 2017-08-04 10:41:08
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                    [post_content] => TIRANA, August 3 - Albania's central bank expects the negative effects that the strengthening of the national currency is having to gradually wane as the economy continues recovering mainly driven by some major energy-related investment, a recovery in exports and a boost in the tourism industry.

The national currency, lek, has strengthened by an annual 2.7 percent against Europe’s single currency, currently trading at an 8-year low of 132.48 with a negative impact on the country's exports which are back to moderate growth mainly thanks to a pickup in commodity prices and the reactivation of the country’s largest steel plant.

Two-thirds of Albanian exports are destined for Eurozone countries which makes them vulnerable to Euro fluctuations.

On the positive side, the depreciation of the Euro against the national currency is good news for borrowers in Euro who have their income in lek and the government’s external debt payments as well as imports whose cost has slightly dropped.

Albania’s banking system is highly euroised with Euro-denominated loans and deposits accounting for about half of the total which has led the Bank of Albania to initiate de-euroisation measures in order to boost the impact of its easier monetary policy and reduce foreign exchange risks.

The Euro depreciation has also slightly affected inflation rate, which dropped to 2 percent in the second quarter of the year, down from 2.4 percent in the year's first quarter as a result of cheaper imports, especially food products, the main item in the consumer basket.

Inflation rate has been at an average of 2.2 percent in the first half of this year, up from a mere 0.7 percent during the same period last year.

Albania’s annual average inflation rate hit a 16-year low of 1.3 percent in 2016, reflecting a slump in global oil and food prices, but also sluggish domestic consumption as the economy grew by 3.3 percent, mainly thanks to major energy-related investment.

The situation in the first half of this year has led the country's central bank to slightly revise downward its inflation rate target for 2017 to 2.2 percent, which is yet 0.8 percent lower compared to the Bank of Albania's 3 percent target, estimated to have a positive impact on the country's economic growth.

The central bank says it will continue its easy monetary policy until the first half of 2018 when inflation rate is expected to achieve its 3 percent target.

"Considering the second quarter performance, our projection for the average inflation rate in 2017 has been slightly revised downward to 2.2 percent compared to a previous 2.3 percent,” governor Gent Sejko told a press conference this week as the central bank continued to hold the key rate unchanged at a historic low of 1.25 percent in an easier monetary policy that continues since May 2016.

The central bank says the appreciation of the national currency is a result of exports growing by 13.5 percent in the first half of this year and foreign direct investment continuing its positive performance mainly fuelled by some major investments such as the Trans Adriatic Pipeline, increasing the euro’s market supply.

However, some local experts have partly blamed the rising cannabis cultivation and the increased presence of Euro in Albania due to drugs sales abroad for the sharp depreciation of lek against the Euro.

The euro dropped to as low as 132.48 lek this week in levels not recorded since late 2009, depreciating by 5.4 percent compared to the average exchange rate of 140 lek for about five years until mid-2015.

The Albanian economy grew by 3.9 percent in the first quarter of this year, in line with the government's target.

"The Albanian economy is gradually approaching its potential target, reflecting both lower unemployment and higher capacity utilization rates. This cyclical improvement will enable a gradual increase in salaries and profit margin reaching its historical average," says governor Sejko.

The Albanian economy has been growing by an average of 1 to 3 percent annually since 2009 following a pre-crisis decade of 6 percent annually, the growth rate estimated to bring welfare to the EU aspirant Balkan economy.

 

 

 
                    [post_title] => Central bank expects national currency strengthening to come to an end
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                    [post_date] => 2017-08-03 11:23:03
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                    [post_content] => TIRANA, Aug. 3 - Albania's Supreme State Audit has identified record high abuses in the country's gambling sector in the past three years as a result of the authorities’ failure to impose and collect informality-related penalties.

In a report on inspections carried out in the first half of this year, the Supreme State Audit said it identified about 50 billion lek (€375 million) in income that state authorities failed to collect from 2014 to 2016. The revenue miss is related to the Gambling Supervisory Authority’s failure to impose and collect fines following seizure of games of chance equipment, often operated informally or not meeting technical requirements.

The abuse is apparently related to a late 2013 nationwide campaign dubbed “The end of madness” that closed down dozens of illegal gambling businesses in a bid to curb widespread informality in a sector that generates more than €100 million in income annually.

However, four years on gambling continues to remain a widespread phenomenon and a booming business while efforts to move casinos from downtown areas have failed.

Informality is still believed to still be huge considering the high tax burden.

Gambling activities have to pay 25 percent of the gross income in taxes, 3 percent of their turnover to the Supervision Unit, and 0.2 percent of their annual turnover to the sports ministry.

In late 2016, the ruling Socialist Party-majority approved a two-year extension to a law disciplining gambling in downtown areas, citing concerns over gambling businesses not being ready to move to tourist attractions, the possible spread of illegal gambling and the state budget losing millions of euros in taxes, in a move which came following apparent successful lobbying by the lucrative gambling industry. The law, initially scheduled to come into force in January 2017, will now be implemented starting 2019 unless a new extension takes place.

Gambling operators have recently addressed the country's Constitutional Court, opposing new fees they will have to pay to a concessionaire monitoring their activity, claiming they are already paying taxes to be monitored by the Games of Chance Supervisory Authority.

Last March, an Austrian-Polish-Albanian joint venture won the right to set up, operate and maintain an online central monitoring system on Albania’s gambling industry for the next 30 years.

The winning concessionaire is expected to charge gambling companies two fees related to the system maintenance and a turnover fee to pay off its investment on the setup of the monitoring system.

The government says the concession is aimed at preventing tax evasion and money laundering in the industry which employs about 1,800 people and generates an annual $125 million in taxes to the state budget.

Gambling is a booming business in Albania and varies from casinos to sports betting. Thousands of betting shops are scattered across the country. A gambling law, which has been in force for several years, bans people under 18 from entering betting shops. Regardless, teenagers are often seen there.
                    [post_title] => Watchdog unveils record €375 million abuse by gambling authorities 
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                    [post_content] => TIRANA, Aug. 1 - Commercial banks have identified a rise in informal borrowing by both businesses and households as a key concern for poor demand for new loans.

The alarm comes as credit officially stands at negative growth rates and real growth is estimated at modest rates considering the write-off effect of non-performing loans that have spent three years in the ‘loss’ category.

It also comes at a time when business and consumer confidence suffered a blow in the second quarter of 2017 ahead of the June 25 general elections due to political and economic uncertainties as the main two parties put an end to a three-month political deadlock only in mid-May under a last-minute deal ahead of the electoral campaign kickoff.

A survey carried out by the central shows informal borrowing remains a widespread phenomenon, especially among debtor households, two-thirds of whom borrow informally mainly in cash. The situation is not as problematic in the private sector where only 4 percent of the enterprises are estimated to borrow from sources outside the banking system.

Banks reported lower demand for new loans in the second quarter of the year as a result of the use of alternative sources of financing outside the banking system, says a central bank survey on lending in the second quarter of the year.

Banking experts say the presence of alternative financing sources and poor consumer confidence has had a negative impact on business and household demand for new loans since the final quarter of 2016.

Local media report a rise in informal borrowing even among business owners  who often use contracts signed by notaries public or no contract at all due to tight lending standards applied by banks as non-performing loans stand at about 17 percent. The process often leads to conflicts between borrowers and informal lenders, due to difficulty to collect debts in case of default.

An increase in deposit withdrawals and money outside banks in the first half of this year, in addition to its traditional trend in electoral years during the past 25 years, also hints an hike in informal lending.

Anecdotal evidence suggest even cannabis money from increased cultivation in the past couple of years is being used in informal lending.

Average loan rates in the national currency slightly rose to 7.5 percent in June 2017 and were up to 4.5 percent for loans denominated in Europe's single currency. Meanwhile, deposit rates stand close to zero, reflecting historic low key interest rates applied by central banks.

 
                    [post_title] => Banks worried over hike in informal lending as demand for new loans drops
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            [post_date] => 2017-08-10 17:25:00
            [post_date_gmt] => 2017-08-10 15:25:00
            [post_content] => TIRANA, Aug. 10 - The Trans Adriatic Pipeline consortium has already completed half of its Albania onshore route works and is on track to start its offshore section across the Adriatic to Italy next year.

Shkelqim Bozgo, the TAP country manager for Albania, says the pipeline scheduled to bring Caspian gas to Europe is already in its peak construction stage and is expected to inject about Euro 800 million in foreign direct investment in the next couple of years.

"TAP's total value, starting from 2016, but even earlier, until the completion of operations is at about Euro 1.5 billion. Of course, 2017 and 2018 are the project's most intensive years and the investment level in each of these years will be at about Euro 400 million," Bozgo has told a national Albanian TV.

The amount of TAP's annual investment represents about 4 percent of Albania’s GDP and 40 percent of total annual FDI inflows.

"The offshore section starts in 2018 and lasts for several months. It's the easiest part because of technological development. The project is expected to be tested and commissioned in 2019," Bozgo adds.

TAP which is expected to bring gas to Europe through Greece, Albania and Italy is generating one of the country’s largest foreign direct projects, with important benefits for a number of industries, including manufacturing, utilities and transport.

Experts have described TAP as an opportunity that would benefit Albania both economically and politically, making the country an important hub of the international gas pipeline for the Western Balkans.

The pipeline in Albania will be approximately 211 km long, starting at the Korça region, southeastern Albania on the border with Greece.

About 13,000 pipes of mostly 18 metres are being used for the Albanian section of TAP, which also includes a 37 km offshore section in the Albanian part of the Adriatic linking it to southern Italy.

With construction works already in their peak stage, TAP’s first gas deliveries to Europe are targeted by early 2020.
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