Moody’s issues annual report on Albania

TIRANA, Jan 14 – In its annual report on Albania, Moody’s Investors Service says the government’s B1 bond rating and stable outlook reflect the country’s hefty debt burden and weak economic and institutional strength.
The rating also takes into account the country’s good prospects for sustainable economic development based upon a strong political consensus and the need to implement pro-business, pro-market structural reforms and policies.
Because of the country’s limited economic and financial development, it has not been directly exposed to the harsh effects of the global credit crunch.
“The rating also reflects the balance of payments risks associated with the country’s large current account deficit and development needs,” said Moody’s Assistant Vice President Joan Feldbaum-Vidra, author of the report.
“Notably, government finances have displayed a good resilience to shock and macroeconomic performance continues to be solid.” She said the government’s debt burden is high for a country at this income level.
“Most of Albania’s foreign debt was borrowed at concessional terms from multilateral and bilateral lenders, and some of its external debt ratios are quite low,” said Feldbaum-Vidra.
“Still, the country registers very large trade and current account deficits, which make the real economy vulnerable to external shocks.”
On the fiscal side, the lack of clear property rights and weak tax administration have hampered budgetary revenue collection, says the Moody’s report, but the authorities have begun to clarify property rights by starting a land title registry.
Improvements in this area will be the key to unlocking greater amounts of both domestic and foreign investment in the economy.
“The government has a full agenda of reforms and a comprehensive energy supply plan that it intends to implement, including the construction of a thermal energy plant and the sale of the power utility’s distribution business,” said Feldbaum-Vidra.
“The uncertain political situation in the region and the economy’s vulnerability to external shocks is seen in the context of the improved policy framework and government debt.” Moody’s last rating action on Albania was made in June 2007 when the ratings on the country were assigned for the first time.