IMF: Albania endangered to external financial shocks

TIRANA, April 30 – Public debt at around 70 percent of the GDP, the current account balance at 10 percent of the GDP and the fiscal financing needs at 28 percent of the GDP are Albania’s main vulnerabilities to external financial shocks, says the IMF in its latest Central, eastern and southeastern Europe regional economic issue report.
Meanwhile, Albania’s domestic credit to private sector in foreign currency at 23 percent of the GDP, private debt from less stable source at 10 percent of the GDP, loan to deposit ratio at 53 percent, public debt exposed to foreign currency risk at 19 percent stand below the threshold.
The IMF expects Albania’s GDP to accelerate to 2.1 percent in 2014 and 3.3 percent in 2015. Real domestic demand and real private consumption growth are expected to turn to positive growth in 2014 and 2015 while real exports growth for 2014 and 2015 is expected at 7 percent.
At 2.1 percent in 2014 and 3.3 percent in 2015, Albania’s growth would be above the average of six Southeastern Europe non-European countries.
The IMF expects average inflation to accelerate to 2.7 percent in 2014 and 2.8 percent in 2015, up from around 2 percent in 2012 and 2013 remaining within the central bank’s 3 percent target range.
Albania’s current account balance is expected to climb to 10.3 percent of the GDP in 2014 and jump to 12.4 percent in 2015.
While most countries in Central, Eastern and Southeastern Europe (CESEE) region have greatly improved their current account positions, vulnerabilities to external shocks persist due to a build-up of private debt during the boom years or due to an increase in public debt since the global financial crisis. As a result, external financing needs tend to be notably higher, on average, for CESEE countries compared to other emerging markets. Also, many CESEE banking systems continue to rely heavily on non-deposit funding, mainly from foreign parent banks, says the IMF.
Growth is gathering momentum in most of Central, Eastern, and South-Eastern Europe (CESEE) in the wake of the recovery in the euro area. Excluding the largest economiesؒussia and Turkeyشhe IMF’s latest Regional Economic Issues report projects the region to grow 2.3 percent in 2014, almost twice last year’s pace.