IMF: Albanian economy to contract by 7.5%

Tirana Times
By Tirana Times September 29, 2020 12:42

IMF: Albanian economy to contract by 7.5%

TIRANA, Sep. 29 - The Albanian economy is expected to contract significantly in 2020, the International Monetary Fund reports.

Contrary to its first projection published earlier this year in April, according to which the economy was expected to drop by 5 percent, the IMF now projects a 7.5 percent economic slowdown by the end of 2020.

Following the latest mission to Albania, the staff further stated that the fiscal deficit is projected to rise to about 7 percent of GDP and the public debt to slightly above 80 percent of GDP by the end of 2020.

However, the IMF expects the economy "to recover from the second half of 2020 and strengthen gradually over 2021 as the impact from the shocks subsides and earthquake reconstruction continues."

According to the Bank of Albania, "in the baseline scenario, the Albanian economy is expected to record a strong decline during 2020" and its peak is predicted to have been the second quarter, to then fade by the end of the year.

"Assuming a favorable epidemiological performance, the Albanian economy is expected to grow and recover the lost volume of economic activity over the next two years," BoA Governor Gent Sejko said earlier.

The IMF experts recommended the creation of a budget which contains non-priority spending to make room for adequate health care provision for the pandemic. Additionally, earthquake construction needs to be made in accordance to an international framework of transparency.

Experts also stressed the need for continuous monitoring as regards public procurements as well as reiterated their advice against a possible tax amnesty, due to the impact it may have on tax compliance as well as money laundering and governance risks.

"We reiterate our call to establish a unified process for preparing, prioritizing, and evaluating all public investment projects, including Public-Private Partnerships (PPPs). The use of unsolicited PPPs should continue to be prevented," the statement reads.

IMF experts added that the tax system needs to be improved as it can improve the investment climate and reduce informality; the tax system in Albanian is already "complex and fragmented, and frequent ad hoc changes have undermined its stability and transparency."

Finally, the IMF emphasizes the need for Albanian authorities 'to target new measures to ensure adequate health care provision and protect those most in need" in case of a more severe pandemic, as well as focus on budget reallocations and additional financing.

Tirana Times
By Tirana Times September 29, 2020 12:42