TIRANA, Sept. 12 – The migrant crisis facing Europe, Brexit, low commodity prices affecting the mining sector, and the long-ailing construction sector are the key threats to Albania’s growth recovery, says UK-based BMI Research part of Fitch Group, a global leader in financial information services.
In its latest country risk report, BMI Research rates the ‘Albanian route’ for migrants mainly from war-torn Syria on their way to Western Europe as the key risk for the Albanian economy, although Albania faced only sporadic cases of migrants stuck in neighbouring Greece crossing through the country while a feared route to Italy through the Adriatic has almost been non-existent during this year.
“The ‘Albanian’ route could become the main alternative after countries such as Hungary, Croatia and Slovenia have built border fences to stop the entry of migrants. This has become particularly pertinent, given Macedonia’s recent tightening of its borders,” says the report.
BMI also warns the UK’s decision to leave the EU 28 block could also affect Albania through lower demand from key trading partners, Italy and Greece.
“The UK’s recent decision to leave the EU could result in a protracted slowdown in key eurozone trading partners, which will weigh on external demand.”
The country’s central bank has earlier warned the direct Brexit implications on the Albanian economy are quite insignificant due to poor trade and investment links between the two countries, but the small Albanian economy could face spillover effects if the UK’s exit from the EU block triggers a new Eurozone recession.
Infrastructure investment and a strong textile sector will continue to drive economic growth acceleration in Albania, says BMI.
“However, with mining sector output suffering at the hands of low oil prices and the fundamentals of Albania’s construction sector deteriorating, we caution that downside risks to our growth outlook are becoming more significant,” warns the Fitch unit.
The slump in oil and mineral prices has already affected investment, production and exports in one of Albania’s key sectors in the past few years.
In its latest country risk report, BMI Research expects the Albanian economy to accelerate to 3.1 percent in 2016 and 3.6 percent in 2017, slightly below the Albanian government’s more optimistic forecasts of growth ranging between 3.4 percent to 4.2 percent over the next three years.
“The government will struggle to reduce unemployment considerably before the parliamentary elections in 2017. While it will make progress improving the country’s investment climate, reforms will not go far enough in a number of key areas, constraining growth,” says the report.
Public debt at 70 percent of the GDP, non-performing loans at 18 percent, sluggish lending and consumption and exports failing to recover due to a slump in commodity prices are the main challenges of the Albanian economy which has been growing between 1 to 3 percent in the past seven years compared to a pre-crisis decade of 6 percent.
