TIRANA, Nov. 8 – London-based European Bank for Reconstruction and Development has upgraded Albania’s 2017 growth outlook, but left unchanged its 2018 GDP growth forecast, in expectations which are considerably lower to the Albanian government’s more optimistic scenario.
In its latest Regional Economic Prospects report, the EBRD says it has revised upward Albania’s 2017 growth outlook to 3.7 percent, up 0.2 percent compared to its May forecast, but left unchanged the 2018 forecast at 3.7 percent in growth expectations which are mainly driven by the Albania section of the major Trans Adriatic Pipeline, the country’s largest foreign direct investment.
The forecasts are in line with the IMF which expects the Albanian economy to grow by 3.7 percent for 2017 and 2018 and only slightly recover to 3.9 percent by 2021 as major energy-related investment that has driven growth tapers off and a controversial Euro 1 billion public private partnership project the Albanian government intends to apply in the next four years is seen as a threat to reduce public debt and prevent accumulation of new government arrears.
The EBRD forecasts are 0.2 to 0.5 percent lower compared to the Albanian government’s expectations of growth picking up to 3.9 percent in 2017 and accelerating to 4.1 percent next year. Translated into concrete figures the EBRD forecasts mean the Albanian GDP the Albanian GDP estimated at €11 billion will miss between €22 million to €55 million for 2017 and 2018.
“Economic activity in Albania continues to be on an accelerating trend. After broad-based growth in 2016 of 3.4 per cent, the rate of increase of GDP rose further to 4 per cent year-on-year in the first half of 2017. Growth is being driven by strong investment, primarily linked with construction of the gas Trans Adriatic Pipeline (TAP),” said the London-based financial institution, one of the main private sector lenders in Albania.
“The short-term outlook remains positive, and we have therefore increased our forecast for overall 2017 growth, based on this strong performance in the first half of 2017, from 3.5 to 3.7 per cent, staying at that level in 2018, on the back of private domestic demand and further major construction work on large energy-related foreign direct investment, including the TAP,” it adds.
Compared to other regional Western Balkans countries, at 3.7 percent, the Albanian economy is expected to register the highest growth rate for 2017-2018.
Regional EBRD growth forecasts range from 2.5 to Bosnia and Herzegovina to 3.7 percent in Kosovo and Montenegro.
The EBRD cut Serbia’s 2017 growth forecast by 1.1 percent to 1.8 percent on the back of the summer drought badly affecting its agriculture sector and difficulties in state-run dominated mining and electricity sectors.
Neighboring Macedonia’s 2017 and 2018 growth forecasts were also downgraded to 1.5 percent and 2.5 percent as the political crisis over the past couple of years has taken a toll on investment and growth.
Neighbouring Greece, Albania’s traditional second most important trading partner and the top foreign investor is expected to overcome its recession with a 2 percent growth rate for 2017 and 2018 with a positive impact for some 500,000 Albanian migrants there and trade exchanges between the two countries.
The Albanian migrant numbers and trade links between the two countries have sharply dropped in the past decade as the neighbouring country faced its worst ever recession in the aftermath of the 2008 global crises that saw its economy contract by a quarter.
A recovery in international oil prices is also expected to support Albania’s oil industry which has been suffering since the mid-2014 slump in oil prices with a negative impact on the country’s poorly diversified exports.
Brent oil prices have currently risen to a 2-year high of above $60 a barrel, up from a 12-year low of $30 a barrel in early 2016, but yet almost half of the peak level of more than $110 in mid-2014 just before the slump.
“The price of Brent oil is expected to remain around US$ 55-65 per barrel in the medium term as long as increases in demand can be met by scaled up production of shale oil in the United States,” says the EBRD.
Since the start of its operations in Albania, the EBRD has invested about €1 billion in over 70 projects in various sectors of the country’s economy.
