TIRANA, July 15 – Albania’s economy was one of the best performing among EU aspirant Western Balkans countries in the first quarter of this year, according to a report by the European Commission.
At 2.8 percent in the first quarter of 2015, Albania’s growth was lower only compared to Macedonia and Montenegro’s 3.2 percent but higher than in Serbia, Bosnia and Herzegovina and Turkey where growth ranged from -1.8 percent to 2.3 percent.
“In Albania, growth was driven by both domestic and net foreign demand. In contrast to developments in most of its peers, in Albania total revenues underperformed, falling short by 4.2 percent compared to plan. The shortfall was however compensated for by lower-than-planned spending and the budget deficit undershot the target by 44.2 percent in the first five months of 2015,” says the Commission’s Directorate-General for Economic and Financial Affairs.
The Bank of Albania kept monetary policy stimulating, maintaining its policy rate at a historic low of 2 percent since January and continuing to inject liquidity into money markets. Albania and Serbia register by far the highest non-performing loan ratios, at around 22.5 percent of total loans in the first quarter of 2015, says the report.
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 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.
