Albania Country Risk Report Q1 2020
We have reduced our 2019 real GDP growth forecast for Albania as a first half slowdown caused by disruptions to electricity output means that our previous forecast will not be achieved. That said, we expect these headwinds to be temporary and to have little impact on other areas of the economy, and we therefore expect a relatively robust recovery in 2020. This will be led by private consumption and government spending, which will offset external sector weakness.
The EU's decision to not begin formal accession talks with Albania will worsen Albania's political environment. Bringing Albania's institutions more in line with those of existing EU members was a major incentive for reforms, which we believe will now lose impetus. Furthermore, given that the decision appears to not only stem from France's broad opposition to EU enlargement but also from specific concerns about Albania – it is unclear if and when further progress will be made. Therefore, the deterioration in the political environment risks becoming a longer-term structural trend as opposed to a temporary setback.
Major Forecast Changes
We have revised downwards our 2019 real GDP growth forecasts to 2.8%, down from 3.6% previously.
Political risk is looming with tensions between the government and opposition parties building. To the extent that this leads to instability, economic growth could come in below our current forecasts.
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