“Fiscal space remains limited by the high level of public sector debt, while negative spillovers from Greece – an important trading partner and source of remittances – remain a key risk to growth,” says the European Bank for Reconstruction and Development
TIRANA, May 14 – Citing limited fiscal space, spillover impacts from the crisis in Greece and severe floods hitting the country last February, London-based EBRD has kept its 2015 growth forecast for Albania unchanged at 2.5 percent, which is less optimistic compared to expectations of 3 percent by government and the IMF and the World Bank.
In its latest Regional Economic Prospects report published this week, the London-based international financial institution expects the Albanian economy to accelerate to 3 percent only in 2016, which is 1 percent less compared to government’s forecast.
At 2.5 percent in 2015, Albania would register one of the highest growth rates in South-eastern Europe, lower only compared to Macedonia’s 3.5 percent and Montenegro and Romania’s 3 percent, the report unveils.
“Fiscal space remains limited by the high level of public sector debt, while negative spillovers from Greece – an important trading partner and source of remittances – remain a key risk to growth. The severe floods that hit Albania in February 2015 have also negatively affected the economic outlook,” says the EBRD.
“We maintain our January forecast of 2.5 per cent growth in 2015, rising to 3 per cent in 2016 on the back of an improved external environment (in the eurozone), the start of the major construction work on the Trans-Adriatic gas Pipeline (TAP), and expected policy moves to reduce the high level of NPLs,” adds the London-based financial institution, one of the key lenders in Albania. The European Bank for Reconstruction and Development has also recently assisted Albania with the establishment of the Investment Council, serving as a linking bridge between the business community and the government and a catalyst helping to create the right business environment for investments.
The EBRD says Albania’s macroeconomic performance has improved within the framework of the IMF arrangement supported by a Euro 331 million loan to help clear arrears.
“In particular, the gradual clearance of public sector arrears is providing a boost to suppliers, while efforts are being made to tackle the problem of high non-performing loans in the banking sector, which is among the highest in the sub-region.”
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.”
