Albania: Country Economic Forecast: 05 Mar 2012 Iran: Country Economic Forecast: 05 Mar 2012

Annual GDP growth slowed to 2.6% in Q3 2011 as falls in retail sales (down 5.5%) and services output offset strong growth in transport (up 19.7%) and industry (4.7%). This left GDP on course for full-year growth of around 2.7%. But tighter credit conditions and lower trade and capital flows because of EU weakness mean that growth is now seen slowing to only around 2% this year before recovering to some 3.5% in 2013. Low winter temperatures and frozen rivers have disrupted power supplies and forced large-scale imports of energy, denting industrial production and widening the fiscal and external deficits this year. Fiscal deficits have raised public debt close to 60% of GDP despite public spending cuts. Inflation slowed to 1.6% in January after a dip to 1.7% in December cut the 2011 average to 3.5%, the same as in 2010. The pick-up earlier in 2011 followed currency depreciation and rising food import prices; high fuel costs and more currency declines mean inflation of 2.5-3% in 2012-13. While nuclear power plant plans have been delayed by a safety review, parliamentary approval for privatisation of oil firm Albpetrol is nearing completion. New foreign owners will get 25-year exploration rights, though tax treatment will tighten. While large state enterprises downsize, an end-2011 Instat survey shows small firms account for 80% of GDP and 82% of employment, after rapid start-up following business tax reduction.