“Floods that hit southern Albania in February are estimated to have affected the livelihoods of 42,000 people and caused direct damage of some Euro 10 million,” says the Commission
TIRANA, April 21 – The European Commission remains optimistic about Albania’s growth prospects in the next couple of years when Albania is projected to register one of the highest growth rates among enlargement countries.
In its latest quarterly report on EU aspirants, the Commission expects Albania’s growth to accelerate to 3 percent in 2015, up from 1.9 percent in 2014, which is in line with forecasts by the Albanian government and international financial institutions such as the IMF and the World Bank.
The Commission’s Directorate-General for Economic and Financial Affairs has kept unchanged its 2015 forecast despite the severe floods hitting Albania last February and the high levels of public debt and non-performing loans.
“Floods that hit southern Albania in February are estimated to have affected the livelihoods of 42,000 people and caused direct damage of some Euro 10 million. The central bank however expected the economic disruption to be temporary,” says the Commission.
At 3 percent in 2015 and 3.5 percent in 2016 Albania is expected to emerge again as one of the fastest growing economy in the Western Balkans and Turkey after lagging behind in 2013 and 2014 and being the only EU aspirant to register positive growth of around 3.3 percent at the onset of the global financial crisis in 2009.
Albania’s public debt at around 70 percent of the GDP and non-performing loans at 23 percent are the highest among the seven remaining EU aspirants after Iceland officially dropped its EU membership bid last March.
The European Commission expects Albania’s unemployment rate to slightly drop to 15.6 percent in 2016, down from a record 18 percent in 2013.
Inflation rate is projected to slightly accelerate to 2 percent in 2015 and 2.5 percent in 2016, yet remaining below the central bank’s target of 3 percent which is estimated to have a positive contribution to consumption and investments.
Budget deficit is also expected to drop to 3.9 percent of the GDP in 2015, up from 5.1 percent in 2014.
Albania’s medium-term economic reform programme, submitted to the Commission last January, projects economic growth to gradually pick up to 3 percent in 2015, 4 percent in 2016 and 4.5 percent in 2017, driven by private domestic demand. The programme commits to continued fiscal consolidation and expects the debt ratio to fall to below 66 percent of the GDP in 2017.
In its winter forecast, the European Commission says Albania’s growth recovery will be driven by domestic demand despite a sharp drop in international oil prices affecting the country’s oil exports and industry.
“The latest data indirectly confirm the firming of private consumption, boosted also by a lower-than expected inflation. One of the factors behind this is the fall in international oil prices, which however seems a mixed blessing for Albania, as it might also affect energy sector investments and the price tag of Albanian crude exports,” says the Commission.
The Commission is optimistic foreign direct investment will get a boost from the start of the Trans Adriatic Pipeline bringing Caspian gas to Europe and several major investments in hydropower projects.
“Vulnerabilities linked to growing external imbalances will be mitigated in the years to come by an expected strong inflow of foreign direct investment, related in particular to the Albanian section of the Trans-Adriatic Pipeline and a major hydropower project,” says the Commission.
“Downside risks emanate however from the possible fiscal impact of electricity sector woes and the scheme that pays compensation for property expropriated during communism,” warns the report.
Data published by the country’s state statistical institute, INSTAT, shows the Albanian economy grew by 1.89 percent in 2014, up from an average of 1.2 percent in the previous two years, an average of 3.5 percent annually in the 2009-2011 period and a pre-crisis decade of 6 percent.
