IMF: Albania’s GDP growth to slow down in 2011

TIRANA, April 12 – The International Monetary Fund (IMF) says the Albanian economy grew by 3.5 percent in 2010 and is expected to slow down to 3.4 percent in 2011, according to revised estimates published in IMF’s World Economic Outlook report this week. The IMF estimates are far lower compared to government’s expectation of a 4.1 percent growth in 2010 and a 5.5 percent growth in 2011. IMF experts expect the Albanian economy to slightly increase to 3.6 percent in 2012 and return to normal growth only by 2016 when the GDP is expected to grow by 4.5 percent.
However, among the 14 central and Eastern Europe countries covered in the report Albania has the third highest growth rate for 2010 after Turkey whose economy registered a record 8.2 growth and neighbouring Kosovo at 4 percent.
As far as consumer prices are concerned, IMF’s economic outlook report says Albania’s inflation rate is expected to climb to 4 percent this year, the maximum target band allowed by the central bank. IMF says inflation rate in 2010 was at 3.4 percent and is expected to be at 2.9 percent in 2012, remaining within the central bank’s 3ѱ percent target band.
According to the IMF, growth in Albania averaged some 6ܠpercent during 2005-08, largely based on advancements in total factor productivity, while inflation was kept in check. Although current account deficits had crept up over time, they mainly reflected an ambitious public investment program and transition-driven productivity gains.
Before the crisis, Albania enjoyed strong growth with comparatively benign external vulnerabilities. Sustained macroeconomic stability, a simplification of the tax system, and structural reformsةn the context of subsequent Fund-supported programs and generally good implementation of past Fund adviceبelped boost investment and productivity.
Facing global crisis effects, Albania’s GDP growth halved to 3.3 percent in 2009, down from 7.7 percent in 2008.
With budget revenues expected to grow by 11 percent, 2 percent more than under the revised 2010 budget, the Albanian economy will probably achieve a GDP growth rate of more than 5 percent only if no major cuts are made in mid-year as happened in 2010.
Asked by reporters if the 2011 draft budget was realistic, IMF’s Gerwin Bell and Finance Minister Ridvan Bode shared different opinions last year when government was drafting the budget. Bell said that IMF considered as immature any draft budget with a revenue growth higher than 6 to 7 percent.
“It is better that the year starts with a more realistic and mature projection in order to make its implementation in 2011 easier,” said Bell. According to him, lowering budget deficits to 2.5 percent in 2011 would also have a positive impact on public debt and achieve the Albanian fiscal policy’s goal of bringing it down to 54 percent by 2013.
The IMF report says global recovery is gaining strength, but unemployment remains high in advanced economies, and new macroeconomic risks are building in emerging market economies. World real GDP growth is forecast to be about 4ݠpercent in 2011 and 2012, down modestly from 5 percent in 2010. Real GDP in advanced economies and emerging and developing economies is expected to expand by about 2ݠpercent and 6ݠpercent,
respectively.