TIRANA, Nov. 18 – London-based European Bank for Reconstruction and Development says reducing informality, private sector investments in infrastructure and energy and tackling non-performing loans should be the key priorities for the Albanian government in 2016. In its latest Transition report, the EBRD welcomes enhanced efforts by the Albanian authorities to reduce informality. “The problem of informality is long-standing in the economy and holds back the development of legitimate businesses as well as depressing tax revenues. The problem is particularly acute in the agriculture sector, where obtaining VAT receipts is very difficult.”
The EBRD also encourages private sector involvement in infrastructure and energy.
“Renewed efforts to involve private companies in the energy sector should be pursued, now that concrete reforms are being implemented, and a successful operations and maintenance public-private partnership (PPP) in the road sector could have important demonstration effects for future
projects, provided the fiscal risks are managed carefully.”
The EBRD, which is one of the country’s main private sector financiers, says successful implementation of the non-performing loan (NPL) plan is critical for restoring credit growth.
“The authorities’ measures so far have helped to stabilize the situation but more efforts are needed to bring NPLs down to acceptable levels.”
Non-performing loans, currently standing at 20 percent, down from a historic high of 25 percent in mid-2014, remain a key barrier for a recovery in lending and the tight lending standards applied by the 16 overwhelmingly foreign-owned commercial banks operating in Albania.
Measures already undertaken by Albania’s central bank include the obligatory write-off of bad loans of more than three years old. Additional measures are expected to include further clarification of the tax definition on bad debt, improved collateral execution, and assistance to corporates for the preparation of recovery resolution plans.
The EBRD expects Albania’s 2015 growth to pick up modestly to 2.3 per cent, assisted by the clearing of most government arrears in the past year, lower interest rates and a gradual pick-up in bank lending. Faster growth is expected in 2016 on the back of an improved external environment, especially in the eurozone, and the start of major construction work on the Trans-Adriatic pipeline. “Over the medium term, Albania could benefit considerably from a global recovery if it is able to make further progress on structural reforms and advance towards the start of EU accession talks,” says the London-based development bank.
