Albania’s poor infrastructure, low income level, underdeveloped market institutions and high foreign debt are the major negative factors restricting ratings.
ISTANBUL, March 24 – Albania’s long-term sovereign rating has been downgraded by a point to ‘BB’ from ‘BB+’, JCR Eurasia Rating, a Turkish-Japanese rating agency that rates Albania’s credit worthiness every year. Short term rating was reaffirmed for the period at ‘B’.
“The rating has been downgraded in view of the overall deceleration in the sovereign’s macro-economic indicators as a result of the effects that the global recession had on the world economies as well as dependent economies,” the rating agency said in a statement.
“Albania’s poor infrastructure, low income level, underdeveloped market institutions and high foreign debt are the major negative factors restricting ratings. Moreover, a high trade and budget deficit to GDP and a decline in GDP per capita during the year have been of concern. Nevertheless, stability on the economic and political front is expected after parliamentary elections took place mid-year 2009, and the centre-right party was re-elected into office.”
Countries like Albania typically hover around a B rating, plus or minus a few points, meaning they are likely to pay their debts in the long run. While highly developed countries, which usually have a triple A, or AAA, rating, meaning they will pay their debts 100 percent of the time.
In its report, JCR says it based Albania’s rating on its position as a potential candidate country for EU accession, which has submitted its application for the membership.
“The governing party and law makers of the country are now required to demonstrate their capacity to move to the next stage of EU integration by particularly improving rule of law and implementing solid political and economic reforms,” the agency said. “The decision from the EU accession committee is expected at a minimum after three years. Any rulings, recommendations or opinions made available by the committee will be followed closely and will have a particular influence on the future sovereign ratings.”
JCR is an international rating agency established by a group of major Japanese institutional investors in Tokyo and authorized by Japan’s Ministry of Finance as a recognized rating agency, and recognized by U.S. Securities and Exchange Commission. Its Turkish-based subsidiary rates Albania and other countries in the region.
The sovereign credit ratings are important for Albania as it tries to at least 300 million euros by be selling its first bonds in a foreign currency to finance budget shortfalls in 2010. Albania is turning to selling international bonds as other types of credit have tightened considerably due to the global recession and issuing bonds offers a way to finance public projects at a better rate, according to the government.
Late last year, another credit agency, Moody’s, gave Albania a B1 rating which put the country in a stable condition compared to its neighbors, but is still a few steps below the perfect rating of developed economies.
Nonetheless, analysts and Albanian finance officials believe that as appetite grows globally to get out of the recession, Albania will be able to raise the money via the euro bonds.
