TIRANA, Nov. 5 – Citing significant fiscal challenges, London-based European Bank for Reconstruction and Development has downgraded Albania’s growth forecast for 2015 but revised it upward for 2016 on improved situation in Albania’s Eurozone partners and the start of the major construction work on the Trans-Adriatic Pipeline.
In its latest Regional Economic Prospects report, the EBRD said it had revised Albania’s 2015 GDP growth forecast to 2.3 percent, down from 2.5 percent last May but upgraded the 2016 expectations to 3.3 percent, up from a previous 3 percent.
The forecasts are almost in line with the Albanian government and the IMF which expect the Albanian economy to grow by 2.7 percent in 2015 and accelerate to 3.4 percent in 2016.
“The Albanian economy has performed steadily in 2015, successfully withstanding the impact of severe flooding in the south of the country in February. However, fiscal challenges remain significant and the government is struggling to reach targets agreed under the IMF programme,” said the EBRD.
“The government has stepped up its efforts to reduce informality in the economy, and these efforts should yield benefits over the medium term,” it added.
At 2.3 percent for 2015 and 3.3 percent in 2016, Albania’s growth would be higher than the average of 1.6 percent in ten South-Eastern Europe EBRD countries of operation, which include Bosnia and Herzegovina, Bulgaria, Cyprus, Macedonia, Greece, Kosovo, Montenegro, Romania and Serbia.
The EBRD expects neighbouring Greece, Albania’s second top trading partner, to plunge into recession again in 2015 and 2016 after escaping its six-year recession in 2014. The new recession could have additional spillover effects for Albania’s exports and remittances from 500,000 Albanian migrants there.
The first nine months of 2015 have been a period of gradual improvement in most of the economies of south-eastern Europe, says the EBRD. The main exception is Greece, which is likely to fall back into recession for the year as a whole after a modest upturn of 0.8 percent in 2014 as a result of political uncertainty, the imposition of capital controls and widespread fears about the country’s future in the Eurozone. “To date, however, contagion effects from Greece on the rest of the region have been largely contained.”
Most countries in the region are expected to maintain growth rates in 2016 at close to or above those recorded this year.
The EBRD had earlier warned “Albania’s strong trade, investment and remittance ties to Greece and Italy, both of which face continued economic gloom, are likely to continue to constrain growth and the high level of public debt will limit the room for fiscal manoeuvre.”
Since the start of its operations in Albania, the EBRD has invested almost €1 billion in some 70 projects in various sectors of the economy.
