The London-based lender says the Albania economy will be in recession in the second and third quarters of this year
TIRANA, July 23 – The European Bank for Reconstruction and Development (EBRD) has lowered Albania’s 2011 GDP growth forecast to 2.3 percent down from 3.1 percent earlier this year. In its latest economic outlook published in July, the EBRD kept unchanged Albania’s 2010 GDP growth forecast at 1.4 percent, which is three times lower than the 4.1 percent growth government expects. Meanwhile, the IMF expects 2.3 percent growth in 2010 and 3.2 in 2011.
The London-based lender says the Albania economy will be in recession in the second and third quarters of this year after the 2 percent year-on-year increase registered in the first three months. EBRD expects the quarterly GDP to register negative year-on-year growth in the second and third quarters with 1.5 and 0.5 percent respectively. However, the fourth quarter is expected to register a significant 5.9 growth.
The Albanian economy contracted by 0.8 percent in the last quarter of 2009, but was one of the few countries to register a positive growth of 3.3 percent.
The EBRD report says the slow growth is attributed to the slowdown in capital inflows and in remittances.
“Albania is the one country in this sub-region that managed an increase in real GDP in 2009, but growth is likely to decrease in 2010, reflecting the impact of recent floods, a slowdown both in capital inflows and in remittances, as well as slower credit growth. The country is also vulnerable to a serious Greek downturn, as the majority of remittances into Albania come from migrants in Greece, many of whom work temporarily in seasonal jobs,” said the report.
Last May, the EBRD downgraded Albania’s 2010 Gross Domestic Product (GDP) forecast from 2.0 in January to 1.4 in May and made a 3.1 percent forecast for 2011.
The EBRD said in its report that the economies of emerging Europe are slowly recovering from the global crisis, but with notable differences in the pace of that recovery among individual countries.
The outlook has weakened most for south-eastern Europe where the recession appears to be lingering, with the important exception of Turkey.
Output growth continues to be near zero or negative in most countries of this sub-region, where recovering exports are offset by weak domestic demand and financial systems suffering pressure from the turmoil in southern European sovereign debt markets. In several countries net capital inflows declined and credit to the private sector contracted or stagnated.
Fiscal consolidation will weigh on growth in the short run in many countries. On average the economies of south-eastern Europe are expected to contract by 1.5 percent this year, compared to 0.3 percent growth forecast in May.
Since the beginning of its operations in Albania the EBRD has invested over 550 million euros in various sectors of the country’s economy, mobilising additional investments of more than 1 billion euros.
