Deutsche Bank: Albanian economy to grow by 1% in 2012

TIRANA, May 8 – Exposure to the euro area crisis, elevated government debt and risk of fiscal slippage will be Albania’s key weaknesses in the next few years, says Deutsche Bank, one of the world’s leading financial service providers which has also managed Albania’s debut Eurobond in late 2010.
In a recent country report, Deutsche Bank expects the Albanian economy to slow down to around 1% in 2012 and to remain below 2% in 2013.
“Albania’s trade and financial links, in particular to Italy and Greece, and its dependence on the inflow of remittances make the economy vulnerable to developments in the euro area. Albania’s external position is characterised by a persistently high current account deficit above 10% of GDP. FDI inflows are expected to moderate somewhat against the slowdown in the euro area but to continue mitigating Albania’s external vulnerabilities,” says the report.
Against a slowdown in economic growth, there is a substantial risk that the 2012/13 fiscal targets of 3% of GDP might be missed. At around 60% of GDP, Albania’s public debt is quite large for emerging market standards and at the highest level in the region, warns the bank.
The government managed to cut down its fiscal deficit from the high 2009 levels (almost 8% of GDP) to est. 3.5% in 2011.
Describing Albania as the only European country besides Poland that managed to avoid a recession in 2009, Deutsche Bank says that “the fallout from the euro area crisis is set to take a temporary toll on the economy, but we should see growth picking up again in the medium-term – even though the strong pre-crisis performance (average real GDP growth around 6% from 2000-07) might be rather out of reach.”
The International Monetary Fund and the European Bank for Reconstruction and Development expect the Albanian economy to grow by 0.5 percent to 1.2 percent while the World Bank has made a 2 percent forecast compared to government’s overoptimistic projection of 4.3 percent.