Vulnerabilities hinder recovery, report notes

TIRANA, Nov. 12 – Albania’s economy is expected to strengthen modestly in 2014 supported by continued growth in exports and a modest recovery in domestic demand, says SEE news in a Southeast Europe’s Biggest Companies report where for the first time Bankers Petroleum has made it to the top 100.
However, stagnating credit, weakening external demand and declining remittances limit the pace of economic progress and output remains below potential, warns the report.
“The informal economy accounts for nearly one third of the GDP and current high levels of debt are a deterrent to investors and the electricity sector poses a large fiscal risk.”
Public and private consumption is expected to fall as a share of GDP as the business sector assumes a larger role. “More aggressive efforts at fiscal consolidation will be necessary as Albania’s public debt and financing needs are some of the highest in the region. Ongoing reforms to enhance the efficiency of tax administration, combined with a concerted effort to reduce the size of the informal sector, should raise tax revenue as a share of GDP. Risks include the country’s high of public debt, sluggish productivity growth and significant external vulnerabilities.”
“Sustainable growth will require reforms to strengthen governance, property rights protection and the rule of law. The large losses in the electricity industry put a major strain on the budget and reduce potential growth. Collection rates in the industry are only around 50 percent.”
“Poor transport, telecommunications and other infrastructure are considered the main obstacles to investment. Weaknesses in the institutional framework mean that the rule of law is limited and corruption is widespread,” adds the report.