TIRANA, March 17 – The Vienna Institute for International Economic Studies expects the Albanian economy to grow between 3.2 percent to 3.6 percent in the next three years, driven by investment growth but sluggish household consumption and exports.
In its new Spring forecast, the Vienna Institute, which is one of the top centers for research in Central, East and Southeast Europe, has left unchanged its GDP expectations for the Albanian economy which are slightly lower compared to the Albanian government and IMF estimates.
“Investment will continue to be a major component of growth whereas household consumption will recover only slowly,” says the Vienna Institute which expects Albania’s growth to accelerate to 3.2 percent in 2016, up from 2.6 percent in 2015.
The Vienna Institute is optimistic about the country’s foreign direct investment prospects, apparently fuelled by the ongoing construction of the major Trans Adriatic Pipeline and the huge Devoll hydropower plant by Norway’s Statkraft.
“For the next three years, foreign direct investments and other capital inflows will support a growth rate of more than 3 percent,” says the Institute.
The Vienna Institute expects the country’s exports to continue being negatively affected by the sharp cut in international oil prices.
Local experts say poor diversification of Albania’s exports heavily relying on oil and base metals whose prices are currently at a record low is expected to have another negative impact on the country’s exports which dropped by 5 percent in 2015, returning to negative growth rates after a contraction in 2009 soon after the onset of the global financial crisis.
The Vienna Institute expects Albania’s unemployment rate to slightly drop to 16.4 percent by 2018, compared to 17 percent in 2015.
Inflation rate is expected to range between 2.3 percent to 2.8 percent for 2016-2018, which is below the central bank’s 3 percent target estimated to have a positive impact on economic growth.
The research center expects the Albanian economy to grow by 3.5 percent in 2017 and 2.6 percent in 2018, compared to the Albanian government’s more optimistic prospects of 3.9 percent and 4.2 percent respectively.
With growth rates expected to range from 3.2 percent to 3.6 percent in 2016-2018, Albania would register one of the best performance among six EU aspiring Western Balkans countries examined in the Vienna Institute report.
For the next three years, the Institute expects growth to be higher in Kosovo, Albania and Macedonia and slightly lower in Bosnia and Herzegovina, Montenegro and Serbia.
The Institute has earlier praised Albania’s reform in the energy sector but expressed concern over the fiscal austerity and the high levels of non-performing loans and external imbalances which may threaten the country’s GDP growth.
