TIRANA, May 10 – The European Commission has kept Albania’s economic growth forecast for 2016 and 2017 unchanged at 3.2 and 3.5 percent respectively on strong investment and recovering private consumption. In its new Spring forecast, the European Commission says investment will be supported by some large FDI-financed projects, implying the Trans Adriatic Pipeline and large hydropower plants, which are forecast to outweigh the oil price-driven reduction in investments in the extractive sector.
Household consumption is projected to rise gradually on the back of gains in employment and disposable income, as well as easing precautionary saving behavior, while exports will gradually recover, says the Commission.
“Lifted by progressively reviving foreign demand, exports are also projected to recover gradually, even if continued low prices for oil, one of Albania’s main export commodities, will weigh on the output and foreign sales of the extractive sector,” the report says.
Low commodity prices affecting the extractive industry, weather induced vulnerability in agriculture and electricity production and external risks related to the Eurozone and top trading partners Italy and Greece are considered risks to the country’s macro-economic forecast.
“The extractive industry, which has been an important growth driver in recent years, might suffer a deeper-than-expected contraction if oil prices stay low for long. Agriculture and electricity production remain subject to weather-induced volatility. The improvement in Albania’s external environment remains fragile and may turn out weaker than expected, negatively affecting trade and remittances,” says the Commission.
“Inflation remains weaker than expected, which suggests that monetary policy will remain loose. However, the pass-through of monetary easing to the economy is still hampered by high, albeit declining, non-performing loans. Fiscal consolidation is forecast to continue and put a small dent in the public debt ratio already this year. Weak trade dynamics are expected to improve gradually,” adds the Commission.
At 3.2 percent for 2016 Albania is expected to have the second lowest growth rate among five EU candidate countries, better only compared to Serbia but lower than Turkey, and neighboring Macedonia and Montenegro.
The Albanian government and IMF forecasts about the 2016 and 2017 growth are at 3.4 percent and 3.9 percent respectively, slightly more optimistic to other international financial institutions.
