TIRANA, April 8 – Albania’s growth is expected to pick up gradually in 2015 to around 2.5 percent on the back of strengthening private consumption and investment, says Deutsche Bank Research, responsible for macroeconomic analysis within Deutsche Bank Group, Germany’s largest bank.
The research arm of Germany’s biggest commercial lender says Albania’s downside risks remain in particular regarding the pace of recovery in the eurozone and its main trading partner Italy which accounts for more than 40 percent of the country’s exports as well as its dependence on remittances from both Italy and Greece.
“The severe flood that hit Albania in February might affect the economic outlook, too. Albania’s medium-term growth prospects are constrained by structural shortcomings such as a weak business environment and corruption,” says Deutsche Bank Research.
The report describes Albania’s public debt at around 70 percent of the GDP including government arrears of 5 percent as one of the highest in the region. Deutsche Bank expects Albania’s central bank to continue its easier monetary policy despite the key interest rate standing at a historic low of 2 percent as inflation pressures remain below the Bank of Albania’s 3 percent inflation target.
Loan standards remain tight due to high level of non-performing loans at around 25 percent but risks stemming from potential losses are mitigated by the strong capitalisation of the banking sector, with a capital adequacy ratio of almost 18 percent in 2013, says the report.
Commenting on Albania’s EU candidate status, Deutsche Bank says “even though it might take Albania up to another ten years until EU accession, the prospect of EU membership is a strong anchor for policy and structural reforms.”
