TIRANA, Jan, 9 – The World Bank has upgraded Albania’s 2018 economic outlook to 4 percent, but expects the country’s economy to slow down to around 3.5 percent in the next three years.
The forecasts are made in the January 2019 Global Economic Prospects report where the World Bank has revised upward Albania’s 2018 prospects by 0.4 percent to 4 percent, and upgraded the 2019 outlook by 0.1 percent to 3.6 percent, but left unchanged its 2020 prediction of 3.5 percent. Prospects for 2021 are not much better with the Albanian economy expected to maintain the same growth rate of 3.5 percent.
The World Bank forecasts are considerably more pessimistic to the ruling Socialists’ baseline scenario that expects growth to gradually recover from an expected 4.2 percent in 2018 and pick up by 0.1 percent each year until it reaches 4.5 percent by 2021 when Albania heads to new general elections.
With a growth rate of around 3.5 percent in the next three years, Albania is expected to lose its pace as one of the fastest growing economies in the Western Balkans and register stronger growth rates only compared to Macedonia and Montenegro among regional competitors.
One of the main reasons that the World Bank has downgraded its Albania outlook for the next few years is the 2019 completion of the Trans Adriatic Pipeline and the Devoll Hydropower, the two major energy-related that drove economic growth in the past five years, triggering more than €1 billion in foreign direct investment.
“Growth in Albania is projected to slow somewhat as private investment decelerates after two large FDI-financed energy projects are completed,” the World Bank said in a late 2018 report.
The latest Western Balkans Regular Economic report by the World Bank showed Albania is almost immune to current global trade tensions between leading economies and Turkish market volatility to the Western Balkans, but a possible escalation of trade conflicts between key players could also affect the small Albanian economy as it did in the aftermath of the 2008-09 global financial crisis.
Fiscal consolidation, more efficient public spending, and structural reforms are still critical to sustainable and equitable growth, urges the Washington-based financial institutions which has been supporting Albania with a series of projects and reforms since the early 1990s collapse of the communist regime.
The World Bank expects Albania’s poverty rate measured at US$5.5/day in purchasing power parity to drop to about a quarter of population by 2020, down from about 28 percent, but yet remain one of the highest in the region.
The World Bank forecasts are also the most pessimistic among international financial institutions.
IMF has also revised upward its 2018 economic outlook on Albania to 4 percent, but expects the country’s growth to linger around 3.7 percent to 4 percent over 2019-2023.
In its latest economic outlook, London-based European Bank for Reconstruction and Development slightly revised Albania’s 2018 economic growth outlook upward to 4 percent and left unchanged its 2019 forecast at 3.9 percent, rating the Balkan country as one of the fastest growing economies in its South-eastern Europe region.
The Vienna Institute for International Economic Studies says it expects Albania’s economy to grow by an average of 4 percent annually over the next couple of years, but warns of risks that public private partnerships and the implementation of a justice reform could pose to the country’s public debt reduction agenda and EU integration prospects.
The European Commission has also revised Albania’s 2018 growth outlook upward, but expects the Albanian economy to slightly slow down over the next couple of years due to lower electricity production and the completion of two large energy projects that drove FDI growth in the past few years.
The EU’s executive arm has raised Albania’s 2018 GDP outlook to 4.1 percent, but the outlook for 2019 when Albania hopes to launch EU accession talks has been left unchanged at 3.9 percent and the Commission expects growth to linger around the same level even in 2020.
In its latest autumn forecast, the European Commission also warns a slowdown in reforms and public debt reduction agenda could pose downside risks to the country’s outlook. In addition, a slowdown in growth in Italy, Albania’s main trading partner and the destination of more than half of the country’s poorly diversified exports could mean more trouble for Albania.
Albania’s GDP growth has only in the past couple of years picked to about 4 percent after avoiding recession, but growing between 1 to 3 percent for about 8 years until 2016. Experts say the country needs to grow by 6 percent annually in order to produce tangible and all-inclusive growth and bridge the huge gap with EU members.
