The IMF expects Albania’s public debt to climb from 61.7 percent of the GDP in 2013 to 65.8 of the GDP in 2018
TIRANA, April 16 – Citing Eurozone crisis effects and high public debt levels, the International Monetary Fund says the Albanian economy grew by 1.3 percent in 2012 and is projected to grow between 1.8 percent to 2.5 percent from 2013 to 2018, according to data published in IMF’s World Economic Outlook Database for April 2013. The 2012 estimate is 0.3 percent lower than that reported by state Institute of Statistics while the 2013 forecast is 1.3 percent lower compared to government’s projection of a 3.1 percent growth rate.
Although managing to be one of the Central and Eastern European emerging economies to register positive growth rates for 2012, the IMF predicts the Albanian economy will keep a constant growth of 2.5 percent from 2014 to 2018, but will be overtaken by other regional economies which suffered recession. The IMF expects Albania’s public debt to climb from 61.7 percent of the GDP in 2013 to 65.8 of the GDP in 2018.
Inflation rate is expected to remain stable varying from 2 to 3 percent remaining within the Bank of Albania 3 percent target.
The IMF expects the volume of exports, one of the key drivers of Albania’s growth, to grow by 11 percent in 2013 and an average of 5 percent annually from 2014 to 2018. General government revenue is expected to remain almost unchanged at 24 percent of the GDP.
“Southeastern Europe will see the most tepid recovery, reflecting to various degrees entrenched structural impediments and competitiveness problems, a continued rise in nonperforming loans, and challenging public finances,” says the IMF in its latest report.
“Several economies in Southeastern Europe that had yet to fully emerge from the 2008-09 crisis fell back into recession. Growth in emerging Europe is projected to pick up to 2ܠpercent in 2013 and 2ޠpercent in 2014, with positive impulses from improved financial market sentiment and easing external financing conditions resulting both from recent EU-wide policy decisions and from gradual recovery in the euro area, says the IMF.
Economic activity should also benefit from monetary easing in the second half of 2012 and smaller drag from fiscal consolidation than during 2012. Nonetheless, various factors will constrain the recovery.
Emerging Europe’s principal export market, the euro area, will remain lackluster, only starting to grow in the second half of 2013. And the ongoing rebalancing of funding for the region’s foreign banks from parent banks to local sources will continue to weigh on credit availability. Emerging Europe is also burdened by such crisis legacies as high nonperforming loan ratios and incomplete repair of public finances.
Last October, the IMF forecast the Albanian economy would grow by 0.5 percent in 2012 and 1.3 percent in 2013.
Nadeem Ilahi, the IMF representative for Albania had previously warned 2013 will also be a difficult year for the Albanian economy, citing risks from key top trade partners Italy and Greece, high public debt levels and problems in the banking sector also identifying the need for structural reforms.
Commenting on Albania’s public debt, whose 60 percent of the GDP ceiling has been lifted making it the highest and most expensive in the region, Ilahi said the situation poses a threat to GDP growth in the future. “The problem is that nearly half of the Albanian debt is short-term maturing in 12 months. Some 70 percent of the internal debt is held by the banking system which is overwhelmingly foreign-owned and has been under pressure by the European financial crisis. Our advice to the authorities is that they must be careful in following these links. Nothing could happen, but the financial crisis in Europe could bring increased risks with debt at these high levels,” adds Ilahi.
“Our advice is that measures must be taken to cut expenditure and increase revenues in order to keep debt in 2013 at the same levels and then gradually reduce it.”
Speaking of Albania’s economic prospects for 2013, Ilahi stressed the need to preserve fiscal discipline in this electoral year. There are also structural problems to be solved by Albania such as the implementation of contracts and property rights, problems that impede foreign investment. “There is also a problem with institutional reforms, such as the justice system reform, required for Albania’s EU accession, which also requires political consensus.”
Affected by the Eurozone crisis, sluggish domestic consumption and high public debt levels, the Albanian economy registered its worst economic performance in the past 15 years in 2012. Data published by the country’s government controlled Institute of Statistics, INSTAT, show the Albanian economy grew by 1.6 percent year-on-year in 2012, the worst annual rate since the collapse of the notorious pyramid schemes in 1997 when the economy shrank by 11 percent, and almost half of the average 3 percent annual growth from 2009 to 2011.
Albania enjoyed an average annual growth rate of 6 percent from 2003 to 2008 and was one of the few countries to register positive growth of 3.3 percent in 2009 in the outbreak of the global crisis.
