By Pier Carlo Padoan*
The Albanian economy maintained its positive momentum in the first half of 2015.
Growth accelerated further while some crucial economic and financial stability indicators improved. The Albanian authorities have continued to pursue their stability-oriented economic policies and growth-enhancing reform agenda. Developments in Greece, with which Albania has extensive trade and financial links, prompted decisive and successful actions by Albanian authorities in order to avoid possible contagion.
Economic growth accelerated in the first half of the year, largely due to higher investments and an improved trade balance. Leading indicators point to continued growth in the second half of the year. However, economic activity remains below potential. Spare capacity is reflected in the continued undershooting of the inflation target and weak demand hinders the fiscal consolidation efforts. Nevertheless, inflation expectations appear to be well-anchored, public debt remains under control, and the drive for fiscal consolidation remains unchanged.
The current account deficit contracted while foreign direct investments were substantially higher, due to accelerated investments in the extracting and oil industry.
We expect the pace of growth to pick up further in the following years. This acceleration will be based on the solid fundamentals of the Albanian economy, on expected improvement in the external economic and financial environment, and on further structural reforms which will improve the business climate and risk-taking incentives in the private sector.
The Albanian government remains committed to its fiscal consolidation targets, as detailed in its Macroeconomic and Fiscal Framework. Despite some revenue underperformance this year, the government has embarked in a widespread reform to fight informal economy, with the goal of boosting fiscal revenues and improve business environment. The pension system was put on a sustainable footing and budgetary risks related to the energy sector were reduced. The fiscal consolidation process will continue to target further improvements in the public expenditure management framework.
The Bank of Albania remains focused on its price stability mandate. This will require the pursuit of an expansionary monetary policy for the foreseeable future. At the same time, the Bank of Albania will continue to diligently exert its banking supervision and regulation functions. The financial system remains sound, underscored by a liquid, profitable and well-capitalized banking system.
Financial system reform will continue, drawing from the FSAP recommendations, with the ultimate goal of creating a sound, efficient and resilient financial system. The Albanian authorities will also continue to implement broader structural reforms, in order to improve the medium- and long-term growth potential of the country. The recent reforms in the administrative and territorial governance and in the education system were successful. The government is also planning to initiate a long-awaited reform to overhaul the current structure and functioning of the judicial system.
The Albanian authorities remain committed to their sustainable growth agenda. They reiterate their intent of anchoring their policies in the on-going IMF-supported program and to pursue with a relentless conviction their EU integration process.
Italian Minister of Economy and Finance speaking on behalf of Albania, Greece, Italy, Malta, Portugal and San Marino at the 32nd meeting of the International Monetary and Financial Committee on October 9 to 10 in Lima, Peru.
