Moody’s affirms Albania’s B1 rating with stable outlook

TIRANA, Nov. 26 – Moody’s, one top sovereign credit rating agency, affirmed this week its B1 rating of Albania with stable outlook.
The affirmation reflects Albania’s economic resiliency throughout the financial and euro area debt crises as well as an improvement in its institutional capacity, mainly driven by its progression in the EU accession process. It also reflects the credit constraints arising from high debt levels relative to its peers and uncertainties regarding the country’s medium-term strategy for fiscal consolidation and debt reduction; part of this uncertainty stems from the upcoming parliamentary elections in 2013. The stable outlook on the Albania’s bond rating reflects a balance of upside and downside risks. While the EC’s recent decision to recommend granting Albania candidate status under conditions is credit positive, high debt burden and uncertainties surrounding the fiscal consolidation plan constrain the rating. In the months following the elections, Moody’s will assess whether these uncertainties remain and whether the rating outlook remains appropriate. Although the government is addressing the economy’s structural problems, more substantial progress would be needed before Moody’s considers a ratings upgrade. Improvements in institution building — including judicial efficiency and success in the tackling of corruption — would be beneficial, as such shortcomings hamper investment. A fiscal plan placing the debt ratios on a downward trajectory in the medium term would also be a source of positive pressure on the rating.
Moody’s revised this week both country ceilings for local-currency debt and deposits to Ba1 from respectively A3 and Baa1 previously. The ceiling for foreign-currency bonds has also been reassessed to Ba2 from Ba1 previously. The ceiling for foreign-currency deposits remains B2.