Albania Country Risk Report Q2 2015
Albania's economy will remain on a low growth trajectory over thecoming years, unless more structural reforms can be implementedto tackle longstanding issues of competitiveness and corruption.
Household spending will be the main driver of real GDP growthin 2015. This is a concern, given that improvements to consumerspending patterns are more driven by external price developmentsthan fundamental improvements to household finances.
The government's fiscal position will remain perilous, with the publicdebt load expected to remain above 70% of GDP.
Tepid external demand from key eurozone trading partners, inefficienciesin key export industries and collapsing global oil pricessuggests Albanian exports will struggle in 2015.
Albania's central bank will remain dovish in 2015, due to declininginflation expectations, weak bank lending and relatively subdueddomestic demand.
Shaky debt dynamics, political infighting and elevated tensions withneighbouring Serbia will persuade the EU against beginning formalEU accession talks with Albania this year.
Major Forecast Changes
Declining inflation expectations have prompted us to downgrade ourpolicy rate forecasts to 1.75% at end-2015, from 2.00% previously.
- Executive Summary
- Core Views
- Major Forecast Changes
- Key Risks To Outlook
- Chapter 1: Political Outlook
- SWOT Analysis
- BMI Political Risk Index
- Domestic Politics
- More Progress Needed For EU Accession Talks To Begin
- Albania will make steady progress implementing reforms aimed at bringing the country closer to the European Union in 2015. But shaky
- debt dynamics, political infighting and elevated tensions with neighbouring Serbia will dissuade the EU from beginning formal accession
- talks with Albania this year.
- Table: Political Overview
- Long-Term Political Outlook
- Stumbling Towards The EU
- We expect Albania to continue progressing towards EU membership over the next decade, though caution that forward momentum
- will be sluggish. Lack of institutional development and endemic corruption remain key challenges to stability over the long term, whose
- presence will diminish efforts to address systemic problems regarding weak go vernance.
- Chapter 2: Economic Outlook
- SWOT Analysis
- BMI Economic Risk Index
- Economic Activity
- Limited Room For Optimism Without Reform
- Albania's economic recovery will remain sluggish over the coming years, preventing the country from converging with regional peers. In
- the absence of more structural reforms, improving consumer spending will be insufficient to compensate for tepid external demand and
- government budget cuts.
- Table: Economic Activity
- Balance Of Payments
- Wider CA Deficits No Cause For Alarm
- Tepid external demand from important eurozone trading partners, inefficiencies in key export industries and collapsing global oil prices
- mean that Albanian exports will struggle in 2015. A stable funding structure means Albania's widening current account deficit is no
- cause for concern.
- Table: Balance Of Payments
- Monetary Policy
- Few Options But To Remain Dovish
- Albania's central bank will remain dovish in 2015, due to declining inflation expectations, weak bank lending and subdued domestic
- demand. Further cuts to the policy rate will be insufficient to drive a recovery in private consumption.
- Table: Monetary Policy
- Chapter 3: 10-Year Forecast
- The Albanian Economy To 2024
- Regional Outlook Weighs On Trend Growth
- Though we project real GDP to expand by 3.4% between 2014 and 2024, we caution that Albania is expected to remain one of the least
- developed states in South East Europe. While small-scale export-oriented manufacturing will begin to take on a more prominent role
- over the next few years, remittance inflows from expatriate migrant workers will remain a key source of foreign capital, underscoring the
- relatively nascent stage of economic development in the Western Balkan state.
- Table: Long-Term Macroeconomic Forecasts
- Chapter 4: Operational Risk
- SWOT Analysis
- Operational Risk Index
- Operational Risk
- table: South East Europe - Labour Market Risk
- table: South East Europe - Logistics Risk
- table: South East Europe - Crime And Security Risk
- table: South East Europe - Trade And Investment Risk
- Table: Main Import Products, 2012
- Chapter 5: BMI Global Assumptions
- Global Outlook
- Weaker EMs To Weigh On Growth
- Table: Global Assumptions
- Table: Developed States, Real GDP GrowtH, %
- Table: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
- Table: Emerging Markets, Real GDP Growth, %