BMI Research urges reforms on competitiveness, corruption

Tirana Times
By Tirana Times March 13, 2015 10:30

TIRANA, March 9 - Albania's economy will remain on a low growth trajectory over the coming years, unless more structural reforms can be implemented to tackle longstanding issues of competitiveness and corruption, according to a report published by UK-based BMI Research, which is part of Fitch Group, a global leader in financial information services.

Household spending will be the main driver of real GDP growth in 2015.

“This is a concern, given that improvements to consumer spending patterns are more driven by external price developments than fundamental improvements to household finances,” says the research company.

BMI Research says Albania’s government's fiscal position will remain perilous, with the public debt load expected to remain above 70 percent of GDP.

“Tepid external demand from key eurozone trading partners, inefficiencies in key export industries and collapsing global oil prices suggests Albanian exports will struggle in 2015.”

In fact, Albania's exports received the first blow this year when exports of "minerals, fuel, and electricity," the lead exports in the past three years, suffered a sharp 41 percent decline last January affected by a 50 percent drop in international oil prices since their peak mid-2014 level.

BMI Research expects Albania's central bank will remain dovish in 2015, due to declining inflation expectations, weak bank lending and relatively subdued domestic demand.

Declining inflation expectations have prompted the research company to downgrade its policy rate forecasts to 1.75 percent at end-2015, from 2 percent previously, which is 1.25 percent below the Bank of Albania target of 3 percent estimated to have a positive impact on economic growth.

BMI Research says it could upgrade Albania’s real GDP growth in 2015 in case of upside growth surprises in either neighbouring Italy or Greece, which are Albania’s top trade partners.

“This could occur if European Central Bank quantitative easing boosts domestic demand more than we expect, or if Greece's negotiations with the troika group of lenders come to a successful conclusion soon.”

Tirana Times
By Tirana Times March 13, 2015 10:30