It is vital that Albania improves competitiveness and exports to offset uncertainties of remittances and other international flows
TIRANA, April 24 – The next few years are likely to be less favorable given the eurozone recession and debt crisis in Greece, Albania’s major economic partner. The slow recovery may take its toll on the most vulnerable, necessitating renewed attention to improving the effectiveness of social protection systems and safeguarding progress on social indicators, says the World Bank in an article called “Albania: Maintaining Growth, While Pursuing Reforms”
Albania weathered the initial impact of the 2008-09 global financial and economic crises relatively well, but the level of the public debt has elevated to around 59 percent of GDP. Since three-fifth of the debt is domestic, and the foreign debt is largely concessional, Albania does not face an immediate risk of re-financing its debt. In order to sustain possible future negative shocks without losing market confidence, public debt needs to be reduced to rebuild sufficient fiscal space. The Bank intensified dialogue with the authorities on macroeconomic policies, budget planning, and financial sector resilience in the context of significantly increased support through development policy loans (DPLs) made available to Albania to help overcome the impacts of the eurozone crisis. The Bank is also supporting reforms to increase effectiveness and administration of social safety nets. It is vital that Albania improves competitiveness and exports to offset uncertainties of remittances and other international flows. Albania still has considerable potential to boost foreign direct investment. Through analytic and advisory activities, the DPL series and investment operations, the Bank is helping to plan a long-term competiveness agenda that includes: skills development and higher education, innovation and information and computer technology, governance, public finance management, and reforms and critical investments in energy, transport and water management.
Albania has made great strides over the last decade and is considered a success story after graduating from the Bank’s concessional lending arm (the International Development Association or IDA) in 2008 to become creditworthy for the International Bank for Reconstruction and Development (IBRD), joining the ranks of the world’s upper-middle income countries. The World Bank has been playing a major role in supporting reforms, strengthening institutions, and financing investments across the full range of sectors.
Over the past decade, Albania has been one of the fastest-growing countries in Europe, enjoying average annual real growth rates of 6 percent.
The poverty rate was reduced from 25 percent to 12 percent between 2002 and 2008, one of the highest rates of poverty reduction in the ECA region.
Institutional capacities for debt management were strengthened leading to participation in international capital markets.
Supported by the Bank and International Finance Corporation (IFC), Albania has taken important steps to upgrade its regulatory framework for business. Its Doing Business indicators and rankings moved from 136th in 2007 to 82nd in 2011, and they achieved the second-highest ranking among the top ten reformers worldwide in 2009.
The legal framework for public private partnerships in some strategic sectors, such as in the energy sector, is improved.
The current portfolio consists of 10 projects totaling US$220.3 million in IDA credits and IBRD loans; US$180 million in co-financing loans, credits, and grants; and US$35 million of recipient-executed Trust Funds – amounting to a consolidated financial package of around US$435 million in various sectors including roads, energy, education, health, irrigation, and rural development. The new World Bank Group Country Partnership Strategy (CPS) for 2011-2014 introduced new IBRD lending of around US$300 million and increased IFC financing for the private sector to a level of US$120-150 million. The CPS includes two DPLs and several new investment operations: additional financing for the ongoing Dam Safety Project, the Social Assistance Modernization Project, and the Water Sector Reform Project.
