TIRANA, May 11 – London-based European Bank for Reconstruction and Development has left unchanged its 2017 economic growth outlook for Albania at 3.5 percent, but warned of downside risks such as internal political problems and a reversal of the recent recovery in oil prices.
In its latest May regional economic prospects report, the EBRD, one of the country’s main private sector lenders, says Albania’s downside risks are significant, apparently related to the political tension and uncertainties ahead of the upcoming general elections.
Albania is heading to the scheduled June 18 general elections amid a political deadlock with the main opposition Democratic Party and its allies boycotting the polls unless they receive guarantees about impartial handling of elections which they claim are endangered by people with criminal records and drugs money from massive cannabis cultivation.
Albania’s central bank and international financial institutions such as the IMF and the World Bank have also warned the escalation of the political crisis putting the June 18 elections at risk could hurt both public finances and deter investment, resulting in lower than expected growth prospects.
A reversal of the recent recovery in oil prices is also described as a major source of risk for commodity exporting countries such as Albania.
Crude oil Brent prices currently stand at about $50 a barrel, down from $58 a barrel last January, but up from a 12-year low of $30 a barrel in early 2016, at almost half of the peak level of more than $110 in mid-2014 just before the slump.
“Growth of 3.5 per cent is expected in 2017, rising to 3.7 per cent in 2018, on the back of private domestic demand and further major construction work on large energy-related FDI, such as the Trans-Adriatic (gas) Pipeline (TAP),” says the EBRD.
The 2017 EBRD growth prospects remain unchanged compared to 2016 when Albania registered a six-year high growth rate of 3.5 percent fuelled by some major energy-related projects and a boost in the tourism sector.
The Albanian economy has been growing by an average of 1 to 3 percent annually since 2009 following a pre-crisis decade of 6 percent annually, the growth rate estimated to bring welfare to the EU aspirant Balkan economy.
The London-based financial institution says the restructuring of state-owned power producer company, KESH, and electricity distribution company, OSHEE, will boost long-term growth prospects in the sector.
Grid losses in the country’s state-run electricity sector dropped to a record low of 28 percent in 2016 while all three distribution, transmission and production operators posted profits following favorable hydro-situation and the ongoing payment of accumulated unpaid bills after a late 2014 nationwide campaign to cut off illegal connections and collect hundreds of millions of euros in electricity consumer debts.
At 3.5 percent Albania is poised to register one of the highest growth rates in South-eastern Europe, but yet lower compared to the Albanian government’s more optimistic forecast of 3.8 percent.
A pickup in the economic recovery of Albania’s top trading partners Italy and Greece is expected to have a positive impact on the Albanian economy which has strong investment, trade and remittance links to the two neighboring countries, the hosts of 1 million Albanian migrants.
In its latest February European Economic Forecast report, the European Commission expects Italy, Albania’s top trading partner, to grow by 1 percent in 2017 and 2018 in ongoing poor growth rates after overcoming its recession in 2013.
Meanwhile, the EBRD expects the Greek economy to pick up to 2 percent in 2017, its highest growth rate in a decade of mostly being in recession which saw its economy contract by about a quarter.
The EBRD describes the 2016 performance in the Western Balkans as somewhat mixed, as a significant improvement in Serbia and continued robust growth in Albania and Kosovo was balanced by a slowdown in Bosnia and Herzegovina, Macedonia and Montenegro.
The EBRD expects all economies in the region to grow in 2017 and 2018, but major uncertainties remain, associated in some cases with internal political problems.
Since the start of its operations in Albania, the EBRD has invested almost €1 billion in over 70 projects in various sectors of the country’s economy.
