2013 Economy Review

January
CEZ’s licence revoked
In an expected move following the aggravation of the electricity situation, and six months ahead of the general elections, Albania’s energy watchdog, ERE, revoked the licence of CEZ Shperndarje, the Albanian subsidiary of Czech Republic based giant CEZ Group which in 2009 acquired the majority stake of the country’s power distribution operator, returning the company under temporary state administration. Under a unanimous decision taken on January 21, the Energy Regulatory Entity (ERE) Board of Commissioners decided to revoke CEZ’s licence in Albania, arguing that the company had failed to make compulsory electricity imports, reduce grid losses, make investments, provide all consumers with power meters, pay debts to state-owned operators KESH and OST, and stop collective power cuts. CEZ immediately announced it has initiated Arbitration procedures to seek damages.

Exports’ growth halves, imports shrink
Affected by sluggish demand from crisis-hit EU partners, the destination of three-quarters of total exports, Albania’s export growth rate halved in 2012 while imports shrank unveiling the poor domestic consumption, which is the key driver of economic growth. Statistics show Albanian exports rose by 8.2 percent in 2012, down from 20 percent in 2011.Minerals and fuels were the only products keeping crisis-hit Albanian exports growing at a moderate pace in 2012 while exports of garment and footwear products suffered a slight shrink. While exports continue their moderate growth, the slight shrink in imports reconfirms the slowdown in domestic consumption in a net-import country such as Albania. Total imports in 2012 dropped by 3 percent to 528 billion lek, according to INSTAT data.

Insurance market up by 7.8%
Fuelled by an increase in compulsory car insurance rates, Albania’s insurance market rose by a moderate 7.4 percent in 2012, registering the biggest increase in the past three years. Data published by the Financial Supervisory Authority show total insurance premiums in 2012 reached around 9 billion lek (Euro 63 million), up 7.38 percent compared to 2011 despite the number of insurance policies falling by a sharp 19 percent. Paid claims, three-quarters of which belongs to car insurance, grew by 27 percent to 2.8 billion lek in 2012.

Balfin Group acquires Bulqiza mine
Albania’s Balfin Group acquired the Albanian subsidiary of Austria-based DCM Decometal which since 2007 had been operating the Bulqiza chromium mine, the country’s biggest. Tirana-based Balfin Group, one of the biggest enterprises in Albania known for the development of shopping malls and its chain of retailers, is owned by Albanian businessman Samir Mane. The Competition Authority said Balfin acquired 100 percent of Albanian Chrome’s shares for an undisclosed amount. The mine employs 660 people and currently has an annual output of 82,000 tonnes of the lumpy ore and fines, at a grade of 40-45% chromite

February
TIA registers first shrink
For the first time during its eight years of concession, the Tirana International Airport (TIA) registered a shrink in passenger numbers affected by global crisis impacts. Passenger numbers at TIA fell by 8.4 percent in 2012.This is the first annual decline in passenger traffic recorded at the airport as the euro zone crisis hit air travel and businesses, airport officials said. Since April 2005, the airport has been managed by TIA, a consortium led by Germany’s Hochtief AirPort GmbH (HTA), one of the leading private airport investors in the world, which has won a 20-year concession to be in charge of the airport’s activities.

Albpetrol’s privatization fails
What would have been Albania’s biggest ever strategic privatization and a boost to the country’s ailing economy in these times of crisis has turned out to be only a beautiful dream. The Albanian government said it has invalidated a record staggering bid worth Euro 850 million on the privatization of Albpetrol oil firm after the winning bidder, Albanian-led Vetro Energy consortium, failed to pay the financial guarantee leading to the finalization of the contract. Few months after an international tender was held, an unexpected Euro 850 million bid by Vetro-Energy turned out to be fake and China’s Win Business consortium which bid Euro 297 million lost interest in Albpetrol.

Kurum acquires four HPPs
The Albanian government signed a contract on the privatization of four small and medium-sized hydropower plants with Turkey’s Kurum International paving the way to its approval by government and finally Parliament. Turkey’s Kurum International, which in Albania already operates the Elbasan steel plant, offered a total of Euro 109.5 million on the privatization of four small and medium sized hydropower plants, being the highest bidder. In an international tender held on December 21, Kurum International offered Euro 52 million on the purchase of the Bistrica 1 and Bistrica 2 HPPs in southern Albania with a capacity of 27.5 MW and Euro 57.5 million on the Ulez and Shkopet HPPs which have an installed capacity of 49.2 MW.

Gov’t revenue register first shrink
For the first time since 1997 when the notorious pyramid schemes collapsed and the economy suffered a sharp 11 percent shrink, government revenues suffered an annual drop, revealing the escalating woes of the Albanian economy since the onset of the global crisis in 2009. Finance Ministry data show total revenues shrank by 0.2 percent to 330 billion lek (Euro 2.3 billion) in 2012, registering the first annual shrink in the past 15 years. The performance proves the escalation of impacts from the global crisis and rising public debt now standing above the former 60 percent of the GDP ceiling. The Finance Ministry data reconfirm the stagnation of domestic consumption, which is the key driver of the Albanian economy at a time when exports’ growth has considerably slowed down due to escalating crisis in the Eurozone and especially top trade partners Italy and Greece.

Lending, deposits slow down
Both lending and deposit growth rates slowed down in the final quarter of 2012 while bad loans stopped their scaring upward trend, according to preliminary data published by the Albanian Association of Banks. After growing by 30 to 50 percent annually in the pre-crisis years, lending grew by an average of 10 percent from 2009 to 2011 but sharply decelerated to 2.36 percent in 2012 as bad loans hit more than 22 percent. Bank deposits at the end of the fourth quarter 2012 reached Lek 991.7 billion, with an annual growth rate of 7.3 per cent.

March
Milk dispute sparks new Albania-Kosovo trade row
The ban of two Albanian milk brands in Kosovo because of slightly higher levels of potentially carcinogenic aflatoxin sparked a new trade dispute between Albania and neighboring Kosovo. Albanian government officials labeled the ban as unfair commercial fight between regional countries, implying Kosovo, after samples tested in Italy proved Albanian milk mostly met EU standards for aflatoxin levels, while some samples proved two to three times above the EU standard but yet seven to eight times below norms allowed in the United States and Canada.

Banks’ profits recover
Non-performing loans slightly slowed down in 2012 when they rose by only 3.8 percent year-on-year, while banks increased their profits by five times, according to the latest Bank of Albania data. Data show bad loans climbed to 22.76 percent in the final quarter of 2012, up 22.3 percent in the third quarter and 19 percent at the end of 2011. After making a profit of only 706 million lek (Euro 5 million) in 2011, the worst since the 1997-1998 turmoil fuelled by the collapse of the so-called pyramid schemes, banks’ profits returned to moderate growth rates, registering around 3.77 billion lek (Euro 26.5 million) at the end of 2012.

Public debt officially jumps to 61.5%
For the first time in the past decade, public debt has officially jumped above the former 60 percent of the GDP statutory limit, posing a real threat to Albania’s macro-economic stability as crisis impacts from the Eurozone intensify. Finance Ministry data show Albania’s total public debt climbed to around 828 billion lek or 61.51 percent of the GDP at the end of 2012, with domestic debt accounting for 34.94 percent and external debt at 26.57 percent. Total debt service in 2012 climbed to 52.16 billion lek, up from 48.7 billion lek in 2011, accounting for 3.88 percent of the GDP, up 0.12 percent compared to 2011.

Statkraft takes over Devoll HPP
In a surprise move just before the expected start of works to built Albania’s biggest ever hydro energy project, Austria’s EVN has announced its withdrawal from the Devoll hydropower plant in South East Albania, and the sale of its 50 percent stake to its Norwegian joint venture partner Statkraf, remaining present in Albania only with its newly built Ashta HPP. Devoll Hydropower, a Euro 950 million project, was set up as a 50/50 joint venture between EVN and Statkraft after the two companies won in 2009 a concession to build three hydropower plants on the Devoll River. The Devoll cascade is the largest ever project carried out in Albania.

Almost half of electricity fed into grid wasted
Almost 40 percent of electricity fed into Albania’s grid is wasted due to massive thefts and technical losses in the dilapidated distribution network. The severe situation is confirmed in the 2012 electricity balance sheet published by the country’s state Institute of Statistics (INSTAT) which shows grid losses in 2012 rose to 3.2 million MWh, up 49 percent compared to 2011. Taking into account that power prices currently stand at 9.53 lek/kWh (9,530 lek/MW) the total grid losses are worth around 31 billion lek (Euro 217 million). The overwhelming majority of around 95 percent of the total losses were caused in the problematic distribution network, managed by Czech operator CEZ Shperndarje.

Number of farms declines by 30%
The number of agricultural holdings in Albania during the past fourteen years has declined by 30 percent, according to preliminary findings of an agriculture census conducted by state Institute of Statistics in 2012. There were 324,013 agricultural holdings in 2012 compared to 466,809 back in 1998 when INSTAT conducted the last agricultural census. The survey shows 70 percent of farms are engaged in livestock breeding, 99.77 percent of them have agricultural land and 70 percent are mixed-farming holdings. The southwestern region of Fier has the biggest number of agricultural holdings with 52,504, followed by Elbasan and Tirana with 43,640 and 41,531 respectively.

April
Eurozone crisis hits FDI, remittances, tourism revenue
Foreign direct investment, migrant remittances and tourism revenue had a smaller impact on Albania’s growth in 2012 when the country registered a 1.6 percent growth, the lowest since the collapse of the notorious pyramid schemes back in 1997. Bank of Albania data show FDI inflows remained at exactly the same 2011 levels in 2012 affected by sluggish investments from the crisis-hit Eurozone partners. Migrant remittances slightly recovered compared to 2011, but yet registered a sharp decline compared to their peak levels in 2007, just before the onset of the global crisis. Meanwhile, tourism revenue continued dropping despite the boom in tourists reported by government authorities. Foreign direct investment, one of the key sources of Albania’s growth in the past few years, stagnated in 2012 when it registered Euro 745 million, exactly the same level compared to 2011 but lower compared to the peak inflow of Euro 793 million in 2010, which made Albania one of the largest FDI recipients in South East Europe.

At 1.6%, Albania registers lowest growth rate
Affected by the Eurozone crisis, sluggish domestic consumption and high public debt levels, the Albanian economy registered its worst economic performance in the past 15 years in 2012. Data published by the country’s government controlled Institute of Statistics show the Albanian economy grew by 1.6 percent year-on-year in 2012, the worst annual rate since the collapse of the notorious pyramid schemes in 1997 when the economy shrank by 11 percent and almost half of the average 3 percent annual growth from 2009 to 2011. The performance clearly reflects negative impacts from crisis-hit EU top trade partners Italy and Greece and problems at home where consumption remains sluggish and bad loans have reached a record 23 percent.
However, the Albanian economy continued remaining one of the best performing among EU-aspirants despite its growth rate slowing down even compared to the onset of the global crisis in 2009 when at 3.3 percent it became one of the few regional economies to register positive GDP growth rates.

May
Business climate deteriorating
More than half of companies represented by the American Chamber of Commerce in Albania consider the current business climate in Albania as unfavorable and two-thirds of them expect it to deteriorate, according to results of the first AmCham Business Index. The respondents perceived government bureaucracy (66 percent), informal economy (64 percent), monopoly or unfair competition (58 percent) and corruption (57 percent), being at high or very high level during 2012. They had a positive perception on factors like order and safety, infrastructure, energy supply and private property. For order and safety (33 percent), infrastructure (32 percent), energy supply (53 percent), private property (35 percent) and intellectual property (29 percent), respondents think that they were at good or very good levels.

June
Partial tax amnesty back in force
With only 67 votes by the ruling Democrats, a partial tax amnesty approved a couple of years ago was made effective again, this time until the end of 2013 but yet pardoning the same debts and fines as the 2011 law and still foreseeing prosecution for false statements. The opposition which did not give its consent described the initiative by the ruling Democrats as politically motivated to gain advantage ahead of elections.

47% stake in Tirana airport taken over
Albania’s Competition Authority says the acquisition of the 47 percent stake held by Germany’s “Hochtief Aktiengesellschaft” in the Tirana International Airport by Canada’s Public Sector Pension Investment Board is in full compliance of Albanian competition laws.
On May 7, Germany’s Hochtief, which has majority stakes in leading airports in five countries, including Albania’s Tirana International Airport (TIA) sold its shares to Canada’s Public Sector Pension Investment Board (PSP Investments) for Euro 1.5 billion. Since April 2005, the airport has been managed by TIA, a consortium led by Germany’s Hochtief AirPort GmbH (HTA), one of the leading private airport investors in the world, which has won a 20-year concession to be in charge of the airport’s activities.

Budget deficit doubles ahead of elections
Albania’s budget deficit reached a record high for the first five months of this year on higher public investments ahead of the June 23 general elections and underperforming government revenues. A report issued by the Finance Ministry shows Albania’s budget deficit rose to 38.3 billion lek (Euro 266 million) in the first five months of 2013, up 114 percent compared to the same period last year when it was at 17.8 billion lek. A sharp increase in public investments and a slowdown in government revenue which remain at negative growth rates are the main causes for the situation which risks further increasing Albania’s public debt stock, currently hovering above the former 60 percent ceiling.

TAP project wins, Albania to become regional gas hub

After apparently holding free and fair elections, a key condition set by international partners for consolidating democracy and paving the country’s road to European Union integration, there is more good news for Albania. The Trans Adriatic Pipeline (TAP) has been announced as the winning project to carry Caspian gas to Europe through Greece, Albania and Italy. The decision is expected to give a major boost to the crisis-hit Albanian economy and its top trade partners Italy and Greece facing recession. The investment would have a major impact on the contribution to GDP, number of jobs created and tax revenues raised, and most importantly, make Albania a regional gas hub, experts say. The TAP pipeline will collect Azeri gas in Turkey and carry it across Greece and Albania before reaching southern Italy, stretching 870 kilometres (540 miles).

July
Albania one of the largest FDI recipient in SEE
Albania remains one of the top FDI recipients in South-East Europe outperforming even more developed regional economies mainly due to its investor-friendly business environment, according to the 2013 World Investment report published by the United Nations Conference on Trade and Development (UNCTAD). The report shows Albania attracted USD 957 million in foreign direct investment in 2012, down 7.6 percent compared to 2011, but remained the second largest FDI recipient among six transition economies of the South-East Europe after new EU member Croatia. At USD 957 million, Albania’s FDI inflows are lower compared to the past four years but yet higher compared to other transition SEE countries such as Bosnia and Herzegovina, Serbia, Montenegro and Macedonia. Unlike other regional countries, FDI in Albania during the global crisis years grew from USD 659 in 2008 to the peak level of USD 1.051 billion in 2010 and slightly dropped to USD 957 million in 2012. FDI outflows from 2007 to 2012 stood at an average of 35 million annually, the report shows.

Exports increase, imports shrink
A sharp increase in ‘electricity, fuels and mineral’ and a recovery in the ‘garment and footwear’ exports kept Albanian exports growing by double-digits in the first half of this year when public finances suffered a blow due to soaring pre-electoral spending. Data published by the country’s Institute of Statistics show Albanian exports grew by 17.3 percent in the first half of this year, remaining the key driver of Albania’s sluggish growth. Meanwhile, imports continued their downward trend unveiling consumers’ saving trend in a net import country such as Albania. In the first half of this year, imports declined by 6.3 percent driven by a sharp decrease in ‘minerals, fuels and electricity’ imports.

August
Azerbaijani company takes over ARMO oil refiner
An Azerbaijan-based company has taken over the majority 80 percent stake in Albania’s ARMO oil refiner for an undisclosed figure as the company had been blocked by tax authorities and was involved in a chain of debts with banks and other market operators. The sale was also confirmed by the Economy and Energy Ministry which holds a minority 15 percent stake in the refinery after selling the 85 percent stake to a consortium led by Albanian businessman Rezart Ta詠back in 2008. Official documents obtained by the National Registration Centre also confirm the changes made in the company’s extract and the sale of the 80 percent stake owned by Rezart Ta詠’s to Heaney Assets Corporation which has also committed to pay off the company’s debts. The Azerbaijani company is quite unknown and does not even have a website address.

September
Albania loses six places in global competitiveness
Albania lost six places in the 2013-2014 Global Competitiveness report published by the World Economic Forum, ranking 95th among 148 economies on deteriorating basic requirements, efficiency enhancers and innovation and sophistication factors. In this year’s report Albania was sandwiched between Jamaica and Kenya, lagging behind all regional countries, except for Serbia which ranked 101st. Albania ranked 89th in the 2012-2013 global competitiveness report and 78th in the 2011-2012 report. The report shows corruption remains the most problematic factor for doing business in Albania for 25.5 percent of respondents, followed by access to financing for 20.3 percent, inefficient government bureaucracy at 12.7 percent, tax regulations at 11.6 percent, and crime and theft at 9.8 percent.

Crisis plunges thousands into poverty
Albania’s poverty rate has increased by 2 percent or around 29,000 people in the past four years as the country’s GDP growth rate dropped to an average of 3 percent down from 6 percent annually in the pre-crisis years. The results are confirmed in a recent living standard measurement survey conducted by Albania’s state Institute of Statistics and the World Bank.
The survey carried out in September-October 2012 on around 6,670 households nationwide showed the number of people who live below the poverty line in Albania rose by around 2 percent to 14.3 percent in the past four crisis years.

October
Lending plunges to negative growth rates
With bad loans at a record 24.5 percent or around more than one billion Euros, lending has dropped to historic lows during the first eight months of this year, registering negative growth rates for the first time in more than a decade. After striving to remain at positive growth rates in the first half of 2013, when it grew by less than one percent, lending registered negative growth rates in the first eight months of this year when it dropped by 1.3 percent compared to the same period last year. Meanwhile, deposits continue their downward trend, unveiling the crisis in Albania as remittances hit record lows and saving becomes more and more difficult. In the first eight months of this year deposits grew by around 2 percent to a total of 947 billion, up only 18 billion lek (Euro 125 million) compared to August 2012.

Economy grows by 1.35% in year’s first half
The Albanian economy continues facing escalating crisis impacts affected by the Eurozone crisis and problems at home with sluggish domestic consumption, and public debt hovering above 62 percent of the GDP. Although exports and government spending grew by double digits in the first half of this year, consumption and investments remained sluggish as indirectly unveiled by the performance of valued added tax and imports of machinery of equipment.
The critical situation of the Albanian economy is also confirmed by the latest data published by the country’s state Institute of Statistics, INSTAT, which shows the GDP grew by only 1.1 percent year-on-year in the second quarter of 2013 with only the construction, agriculture and industry branches registering positive growth rates. Taking into account that the Albanian economy grew by 1.7 percent in the first quarter of 2013, the GDP growth rate for the first half of 2013 is at only 1.35 percent, one of the lowest in the past 16 years, higher only compared to the first half of 2012 when the Albanian economy grew by only 0.7 percent, affected by severe weather conditions in the first quarter of the year and an energy crisis.

IMF: Growth to range between 1.7 to 2.5%
The International Monetary Fund expects the Albanian economy to remain sluggish in the next five with growth rates ranging between 1.7 percent in 2013 to 2.5 percent in 2018. In its October World Economic Outlook, the IMF says the Albanian economy is expected to grow by 1.7 percent in 2013, up only 0.1 percent compared to 2012 when it registered its poorest GDP growth rate in the past 15 years and half of the average 3 percent growth rate from 2009 to 2011. The expected 2013 growth rate at 1.7 percent is 0.5 percent lower compared to the average growth rate of the central and Eastern Europe average of 2.3 percent. The IMF expects Albania’s growth rate to slightly accelerate to 2.1 percent in 2014 and rise to 2.5 percent in 2018.
The IMF forecasts Albania’s inflation rate to slightly increase to 2.5 percent in 2013, up from 2.4 percent in 2012 remaining within the central bank’s 3 percent target band.

Business climate deteriorates
Doing business in Albania has become more difficult in the past three global crisis years, says the Doing Business 2014 report released by the World Bank and the International Finance Corporation. The report ranked Albania 90th in a 189 country-list, eight places worse compared to the revised 2013 ranking, and better only compared to Serbia among regional countries.
The report says Albania is among few economies which made the payment of taxes easier.” In Albania, corporate income taxes are now paid quarterly rather than monthly,” says the Doing Business report about the only reform singled out in Albania.
Albania’s worse ranking in the report is dealing with construction permits (189th) because of no practice in the procedures, time needed and cost. Getting electricity ranks Albania the world’s 158th because of an average of 177 days needs to have access. Albania still ranks poor in paying taxes (146th) despite cutting down the number of corporate income payments.

November
Banks report Euro 9 million in losses
Affected by credit growth having plunged to negative growth rates and bad loans at a record 25 percent, the 16 commercial banks operating in Albania are facing their worst ever situation since the collapse of the so-called pyramid investment schemes in 1997. Central bank data shows banks’ net income in the first three quarters of this year registered a loss of around 1.3 billion lek (around Euro 9 million), the worst performance since 1998 soon after the turmoil triggered by the collapse of the pyramid investment schemes when the 10 banks operating in Albania at that time reported losses of around 3.3 billion lek (Euro 23 million). Bank of Albania data show banks’ profits during the first three quarters of this year registered a loss of 1.27 billion lek, compared to profits of 1.5 billion lek in the first half of the year and 3.14 billion lek (Euro 22 million) in the first three quarters of 2013.
Non- performing loans in the third quarter of the year reached 24.34 percent, slightly down from 24.39 percent in the first half of the year and 22.7 percent in the third quarter of 2012.

Crown Agents to survey customs points
The Albanian government will pay UK-based Crown Agents Euro 8.5 million during the first two years of its operations in Albania where it will assist the country’s customs administration improve its performance by fighting corruption. The contract has sparked heated debate with the opposition Democratic Party which describes the deal as abusive and unnecessary.
The contract with Crown Agents foresees the UK-based company will be paid Euro 4.25 million per year, a total of Euro 8.5 million in the first two years, with an option of renewal for a third year. The contract also foresees Crown can lose 25 percent of the amount if it is not successful in increasing customs revenue. The company will be stripped of all taxes during its operation in Albania, including profit tax, personal income tax for its experts, VAT, and social security and health insurance.

Administrative courts finally operational
The four-year odyssey of administrative courts in Albania is finally over. Six administrative courts have been set up in Albania’s key regions have opened, giving an end to the saga of the administrative courts system as an important step in reforming the judicial system, ensuring legal review of administrative decisions by independent courts, increasing transparency and fighting corruption in the civil service. The establishment of the administrative court had been blocked by the approval of the three laws required by the European Commission for Albania’s EU bid, among which the law on the High Court. The law requiring a qualified majority of 84 votes was approved last May in a special session summoned to approve the three laws required for Albania to obtain EU candidate status.

Petromas, Shell discover oil in Shpirag drilling
Canadian-based Petromanas and its joint partner the Royal Dutch Shell have announced positive test results from its Shpirag-2 well in Block 2-3, which covers an area of 3,450 square kilometres onshore south-central Albania. Following acid stimulation, the Shpirag-2 well flowed naturally for 24 hours. During the extended test, the Shpirag-2 well flowed at rates of 1,500 to 2,200 barrels per day of oil equivalent (boe); 800 to 1,300 barrels per day (bpd) of 35 to 37 degree API oil and 2 to 5 million cubic feet per day (mmcfd) of gas through varying choke sizes, at wellhead pressures ranging from 1,700 to over 3,000psi. The gas oil ratio was in the range of 2,500 to 2,800 scf/bbl, Petromanas said in a statement.

December
Debts to business community lower than claimed
The Albanian government owes the business community 24.6 billion lek (Euro 172 million) in unpaid bills and arrears, Finance Minister Shkelqim Cani announced unveiling the findings of an audit carried out by accountancy giant Deloitte.
“Deloitte has identified 24.6 billion lek that the state budget owes to Albanian or foreign businesses. However, this is only part of the debt and does not include debts the government owes to individuals based on law or court decisions,” said minister Cani, adding that 65 percent of the identified debt belonged to construction companies for finished public works, followed by the health sector with 17 percent and the education sector with 8.4 percent.

Gov’t confirms shift to progressive tax
The Albanian government says it is determined to a shift to a progressive tax on personal and corporate income despite opposition by the business community favouring the current 10 percent flat tax which has been in force since January 2008.
The government has clarified that it will apply a lower tax on small businesses and raise corporate income tax to 15 percent, up from 10 percent currently. Meanwhile, personal income tax will also shift into a progressive tax which government says will benefit 97 percent of Albanians, but the details have not been made official yet.

S&P downgrades Albania’s credit rating
Citing a significant widening of the fiscal deficit and rollover risk on increased debt stock, Standard & Poor’s, one of the top three international credit rating agencies, has lowered Albania’s long-term sovereign credit ratings to ‘B’ from ‘B+ with a negative outlook. The new rating means Albania is more vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet financial commitments, according to S&P’s definition.
“We consider that Albania could face difficulty rolling over its debt without financial assistance from official lenders. We are therefore lowering our long-term sovereign credit ratings on Albania to ‘B’ from ‘B+’. At the same time, we are affirming the short-term ratings at ‘B’. The negative outlook reflects the one-in-three chance that we could lower the ratings on Albania over the next year due to the high rollover risk on its increased debt stock,” says Standard & Poor’s Ratings Services.

FDI continues rising, remittances, tourism revenue shrink
With domestic consumption at sluggish rates, exports and foreign direct investment have emerged as the key drivers of Albania’s moderate growth during this year when the economy is expected to growth at around 1.2 percent, the lowest rate in the past 15 years. Both exports and FDI grew by double digits in the first three quarters of this year, while domestic consumption remained sluggish as indirectly unveiled by the performance of the value added tax.
Meanwhile, remittances and tourism revenue continue their downward trend affected by the Eurozone crisis. FDI in the first three quarters of this year rose to 712 million euros, up from 562 million euros during the same period a year ago, registering a record high for the first three quarters of a year, according to Bank of Albania data.

New cut to key rate after low inflation, downgrade by S&P
In an unexpected move just three weeks after the latest cut to the key interest rate, Albania’s central bank has made another intervention to the monetary policy in an effort to give a boost to the ailing economy as inflation stands at a record low. The Bank of Albania announced on Monday it has cut the key rate by another 0.25 percent to a historic low of 3 percent, the fourth cut in a row for this year when the central bank has lowered the key rate by a total of 1 percentage point.
The move comes after the inflation rate hit a 20-month low of 1 percent in November 2013 and soon after Albania’s credit rating was downgraded by one of the top three international rating agencies.