The IMF expects Albania to be the best performer among 13 emerging and developing European countries from 2016 to 2019 with average growth ranging from 4.2 percent to 4.7 percent.
TIRANA, April 8 – The International Monetary Fund expects Albania to be one of the best performing economies among emerging and developing European countries in the next five years. In its latest World Economic Outlook for April 2014, the IMF expects the Albanian economy to recover to 2.1 percent in 2014 after sluggish growth in 2013 and accelerate to 3.3 percent in 2015.
The IMF which is assisting the Albanian government return to sustainable growth through a series of reforms supported by a Euro 331 million loan to pay off accumulated unpaid government bills expects Albania to be the best performers among 13 emerging and developing European countries from 2016 to 2019 with average growth ranging from 4.2 percent to 4.7 percent.
The same to the Albanian government’s projections, the IMF expects public debt to climb to 71.6 percent of the GDP in 2014, before going on a downward trend and drop from 71.1 percent in 2015 to 57.1 percent in 2019.
The IMF expects Albania’s GDP per capita to climb to 4,998 USD in 2014 and to 9,903 USD based on purchasing-power-parity per capita GDP.
Inflation rate for the 2014-2019 period is projected to range from 2.7 percent to 3 percent, remaining within the central bank target range of 2 to 4 percent.
“Growth decelerated in emerging and developing Europe in the second half of 2013 as the region contended with large capital outflows. Despite positive spillovers from advanced Europe, the recovery is expected to weaken slightly in 2014. Fragilities in the euro area, some domestic policy tightening, rising financial market volatility, and increased geopolitical risks stemming from developments in Ukraine pose appreciable downside risks. Policies aimed at raising potential output remain a priority for the region,” says the IMF in its latest economic outlook report.
In its previous country report, the IMF recommended ambitious reforms, including in the areas of pensions, energy, local government, public administration and the business environment, as essential to support medium-term growth and debt sustainability.
“Lack of reforms has affected the country’s growth potential. While macroeconomic imbalances and recent policy slippages have affected confidence in the economy, a sustained deceleration of structural reforms has coincided with declining potential growth in recent years. It has also prevented a broadening of the productive base, reduction in economic informality, and diversification of exports.”
While some of IMF’s tax and expenditure measures have already been adopted in the 2014 fiscal package, the IMF recommends new tax hikes to improve the sluggish performance of Albania’s budget revenue.
The Albanian government has already adopted a higher corporate income tax, increased excise taxes on cigarettes and energy drinks, doubled property taxes, and increased the environmental tax on fuel. The IMF proposes new measures that would widen the VAT base by reducing exemptions on educational services and ship import and increasing the withholding tax on capital incomes from 10 to 12 percent. The IMF proposes the introduction of tolls on the Durres-Kukes highway linking Albania to Kosovo which is scheduled to be awarded to a concessionaire and increasing taxes on cars.
Among expenditure measures, the IMF recommends reducing network loss in electricity distribution, freezing public administration wages and limiting pension increases to inflation rate.
The IMF proposes a reform in the pension system by increasing the retirement age for men to 67, up from 65 currently and to 65 for women, up from 60 currently.
