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Albania Country Risk Report Q1 2019

Albania Country Risk Report Q1 2019

An opposition boycott of parliament will slow Albania's reform process, reinforcing our view that EU accession is unlikely in the next decade In addition to the likely slow pace of reforms, the alleged blurred lines between politics and organised crime that underpin the opposition's accusations against the government will likely increase certain EU members' reservations about Albania's accession credentials Against this backdrop, while we retain our view that the accession process will continue and eventually lead to Albania joining the EU, the risks to this view are rising

We have increased our real GDP growth forecasts to 4 0% for both 2019 and 2020 (up from previous respective forecasts of 3 5% and 3 7%) as incoming data suggests that the Albanian economy is on a stronger footing than we previously anticipated Rapid currency appreciation and declining inflation will prompt the Bank of Albania to keep monetary policy loose, which will help to support domestic demand This bright outlook for domestic demand will help to offset a dimming picture for the external sector amid slower growth in key trading partners in the EU and growth will, therefore, only slow marginally relative to the 2018 peak

Albania's long-term growth outlook will be supported by a strong infrastructure pipeline

With Albania's current account set to remain firmly in deficit over the coming years, the country will continue to cover its external financing needs with inward foreign direct investment and FX reserves

Albania's CPI will remain vulnerable to changes in food and energy prices in the years ahead Rising global energy prices and strong domestic inflationary pres-sures will see CPI growth accelerate in H117 Major Forecast Changes

No major change

Key Risks

Albania's public debt stood at 72 4% of GDP in 2016, among the highest in the emerging European region, having risen since 2008 on the back of loose fiscal policy and weak economic growth

Given the size of the public debt load relative to GDP, risks to debt sustainability and the broader fiscal and growth outlook in Albania remain prominent

A worse-than-expected fiscal performance, possibly caused by fiscal slippage, an erosion of political will to pursue consolidation, or weaker economic growth, may erode investor confidence and raise borrowing costs


Executive Summary
Core Views
Major Forecast Changes
Key Risks
Country Risk Summary
Economic Risk Index
Political Risk Index
SWOT
Economic – SWOT Analysis
Political – SWOT Analysis
Economic Outlook
Economic Growth Outlook
Domestic Demand To Keep Albanian Economy On A Strong Footing
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
Outlook On External Position
TABLE: TOP FIVE GOODS IMPORTS IN 2016
TABLE: TOP FIVE GOODS EXPORTS IN 2016
TABLE: CAPITAL AND FINANCIAL ACCOUNT BALANCE
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Structural Fiscal Position
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
10-Year Forecast
The Albanian Economy To 2027
Regional Outlook To Weigh On Trend Growth
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Albania Country Risk Q1 2019THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.ContentsPolitical Outlook
Domestic Politics
Albanian EU Accession: Already Distant Prospect Receding Further
Long-Term Political Outlook
Stumbling Towards The EU
Operational Risk
TABLE: LABOUR MARKET RISK INDEX
TABLE: LOGISTICS RISK INDEX
TABLE: TRADE AND INVESTMENT RISK INDEX
TABLE: CRIME AND SECURITY RISK INDEX
Global Macro Outlook
Inflation And Policy Risks Rising
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS, REAL GDP GROWTH, % y-o-y
Index Tables
TABLE: ALBANIA – MACROECONOMIC DATA AND FORECASTS

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