“Due to the new Albanian government’s austerity policy we expect domestic demand to stay rather depressed for the years to come,” says the Vienna Institute.
TIRANA, July 8 – Citing austerity measures by the new Socialist Party-led government, the Vienna Institute for International Economic Studies expects a slowdown in the Albanian economy for the next three years. New forecasts by the Vienna Institute show the Albanian economy is expected to grow by 1.3 percent in 2014, 1.5 percent in 2015 and slow down to 0.9 percent in 2016, differently from other top international financial institutions which expect growth to range between 2 to 3 percent during the period.
“Due to the new Albanian government’s austerity policy we expect domestic demand to stay rather depressed for the years to come. This is one of the main reasons why we have decided to reduce the outlook for GDP growth for 2014 to 1.3 percent. Our forecast for 2015 remains at 1.5 percent and we expect GDP growth in 2016 not to surpass 1 percent,” says the Vienna Institute in its latest forecast.
The Vienna Institute expects Albania’s investments to remain sluggish, inflation pressures low and unemployment at 15 percent over 2014-2016 period.
“The economies of Serbia, Croatia and Bosnia and Herzegovina will most likely be in recession or near stagnation in 2014. Growth in Albania, Montenegro, Macedonia and Kosovo will be more robust but mostly below previous expectations,” says the report citing the severe floods that hit Serbia and Bosnia and Herzegovina in May 2014.
In an earlier report, the Vienna Institute said restrictive fiscal policy and reduced lending activity owing to high levels of non-performing loans will likely curtail economic growth to 1 percent in 2016.
Top international financial institutions such as the World Bank, the IMF and the IMF have made more optimistic forecasts about the Albanian economy.
In line with the Albanian government and the IMF, the World Bank expects the Albanian economy to recover to 2.1 percent in 2014 after growing by only 0.4 percent in 2013, the lowest rate in more than a decade
The World Bank expects the Albanian GDP to further recover to 3.3 percent in 2015 and to 3.5 percent in 2016, slightly above the average of the ten Central and Eastern European economies. Meanwhile, the current account balance measuring the difference between the country’s savings and investments is expected to slightly drop to a deficit of 10.3 percent of the GDP in 2014 but increase to 12.4 percent of the GDP in 2015 and 14.8 percent in 2016.
In two recently-approved development policy loans totaling $220 million, the World Bank will support Albania’s public finance management and financial sector stability. The World Bank has also expressed its willingness to support the Albanian energy sector with a USD 150 million loan, says the energy ministry.
Albania will see a modest upturn in 2014-2015 with growth of 1.7 and 2.0 per cent, respectively supported by a new agreement with the IMF and World Bank assistance in dealing with high levels of non-performing loans and weak credit growth, says London-based EBRD in its latest Regional Economic Prospects report. The forecasts are slightly lower compared to the Albanian government and the IMF which expect the economy to recover to 2.1 percent in 2014, up from 0.4 percent in 2013 and accelerate to 3.3 percent in 2015.
