Public debt, unpaid bills remain key barriers, experts say

TIRANA, Dec. 3 – Public debt, accumulated unpaid bills to businesses, and the need for structural reforms are the main challenges the Albanian economy faces as it struggles with the lowest GDP growth rates also affected by spillover impacts from top trade partners Italy and Greece.
“Albania is facing a tough economic and financial situation because it has a public debt ranging from 64 to 72 percent of the GDP which is grave burden for its fragile economy especially in the short and mid-term. In a broader context, the fact that the situation in Greece continues deteriorating and it is not very optimistic in Italy, argues the forecast that the Albanian economy will not grow more than 1.5 to 2 percent even in 2014. The two top trade partners of Albania have acted as buffers to unemployment and many investments made in Albania. Albania’s main sources of growth such as the construction sector, and revenue remittances, and privatizations have somehow exhausted making the economic situation more difficult,” says economic expert Ardian Civici.
Sybi Hida, another economic expert, says paying off accumulated debts and arrears to the business community is of prime importance at this moment.
“The payment of debts to businesses is very important because this will give a boost to the economy and regulate the business relations with the banking sector. Albania finds itself in a moment when it needs structural reforms, crucial interventions which affect the budget, the pension policy, the administration and other sectors which are a burden to the state budget,” he said. Sybi Hida, who served as an MP of the Democratic Party in the previous legislature, says the Albanian economy needs reforms to make it operate under free market principles. “The pension, transport, road maintenance and energy sectors should shift to free market,” he said.
In its latest report, Moody’s Investors Service, which is one of the top sovereign credit rating, reaffirmed Albania’s B1 rating but warned it could downgrade the country’s credit rating on rising debt levels and subdued economic growth. Moody’s says that Albania’s B1 government bond rating remains constrained by the country’s significant fiscal challenges, its rising debt levels and the subdued economic growth that the rating agency expects over the next few years. Positive externalities are likely to be derived from Albania potentially being granted EU candidate status in December and the construction of the Trans Adriatic Natural Gas Pipeline in 2015, says Moody’s.
Obligations rated B are considered speculative and are subject to high credit risk, according to Moody’s definition. 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.