TIRANA, Dec. 9 – Albania’s failure to stabilize the fiscal deficit and public debt ratio would undermine the country’s stable outlook, Moody’s Investors Service, one of the top three international rating agencies has warned in its latest analysis on Albania.
The rating agency last rated Albania as B1 stable in mid-2014 citing a fiscal consolidation program with the IMF and the EU candidate status.
Albania’s key credit challenges hinge on its high debt ratio, which Moody’s expects to peak at over 73 percent in 2015, before declining to around 70 percent in 2016, as well as the country’s sizeable gross borrowing requirements, although refinancing risks have been mitigated via the issuance of its second EUR450 million Eurobond in November 2015, Moody’s said.
“While Albania’s EU candidacy has fostered progress in tackling corruption and advancing public sector reform, institutional convergence with EU standards remains protracted and we expect the business environment to remain constrained,”,says Evan Wohlmann, an Assistant Vice President – Analyst at Moody’s and author of the report.
“We expect positive effects from EU integration, which has proven to be an important driver of foreign direct investment inflows among accession countries in the region”, he added.
The agency hails the Albanian government’s work with international financial institutions such as the IMF and the World Bank and the country’s comprehensive power sector reforms as essential for an improvement in the business environment and for the prevention of a renewed build-up of government payment arrears.
“Successful progress with respect to credit positive structural reforms, specifically tackling corruption, the strengthening of property rights and judicial efficiency, would result in improved competitiveness and enhanced business attractiveness,” it says.
Last October, Standard and Poor’s, another big three rating agency, affirmed Albania’s ‘B/B’ Ratings with a positive outlook, withdrawing from its warning of downgrading Albania and several South East European countries, where subsidiaries of Greek banks hold a considerable share of assets after a bailout deal was reached on the Greek debt crisis
Obligations rated B are considered speculative and are subject to high credit risk. Both S&P’s B+ and Moody’s B1 ratings signify that the issuer or carrier is relatively stable with a moderate chance of default and that investors and policyholders of the rated entity are taking a low to medium risk.
