TIRANA, Jan. 19 – Albania is expected to register one of the highest growth rates among regional EU aspirants in the next couple of years, but needs to continue its fiscal consolidation efforts and bring down public debt as it currently hovers at about 71 percent of the GDP, the European Commission says in a quarterly report on enlargement countries.
The European Commission expects the Albanian economy to grow by 3.2 percent in 2016 and pick up to 3.5 percent in 2017 and 2018, in forecasts which are between 0.2 to 0.6 percent lower compared to the Albanian government’s more optimistic forecasts.
Albania’s 2016 economic expectations are 0.5 percentage points higher compared to Serbia and Montenegro and 1.1 percent higher compared to neighboring Macedonia. The 2017 and 2018 prospects are slightly less optimistic as all regional EU aspirant economies are expected to register growth rates of above 3 percent.
“In Albania, a broad-based undershooting of budgeted expenditures resulted in a general government surplus of 0.5 percent of GDP in the first eleven months. Continued fiscal consolidation (without, however, undermining much-needed capital spending) is necessary in a number of countries to rebuild fiscal buffers and reduce the level of public debt which is especially high in Serbia (72.1 percent of GDP), Albania (70.8 percent of GDP) and Montenegro (60.8 percent), and lower but on an increasing trend in Macedonia,” says the European Commission report.
The Commission, which has made a positive recommendation about opening EU accession talks with Albania provided the country implements its long-awaited justice reform and tackles corruption, warns external imbalances remains a key challenge for the country.
“External imbalances remain a key challenge in most Western Balkan countries, reflected in large merchandise trade deficits ranging from 12 percent of GDP for Serbia to around 19 percent or above for Macedonia, Albania, and Bosnia and Herzegovina and above 40 percent for Kosovo and Montenegro,” says the report.
The European Commission has earlier warned the upcoming mid-2017 general elections and the end of a 3-year IMF supported programme could put at risk the country’s fiscal consolidation path.
“In the run-up to next year’s election there is a risk that the government relaxes its fiscal consolidation plans, which will lose an important anchor following the end of the country’s IMF-supported programme in February 2017,” says the Commission.
The run-up to general elections has always been accompanied by threats to public finances in Albania in the past 25 years of transition with incumbent governments sharply increasing public investments and putting at risk budget deficit and public debt targets, apparently to gain an electoral advantage.
