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Albania Country Risk Report Q2 2016

Albania Country Risk Report Q2 2016

Core Views

Albania will remain attached to a relatively low growth trajectory overthe coming years, amid subdued exports and government fiscalconsolidation efforts.

More efforts need to be made to implement structural reforms aimedat tackling corruption and improving labour market flexibility, if Albaniais to have any hope of converging with historically more developedregional peers.

Albania’s large and entrenched trade balance shortfall will ensurethat the country’s current account remains firmly in deficit over thecoming years.

Uncertainty in neighbouring Greece after the country’s debt crisiswill increase the scope for regional instability. It will also weigh ondemand for Albanian exports to Greece and remittances inflowsfrom Albanian workers based in Greece.


Executive Summary
Core Views
Key Risks
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Steady, But Below Potential Growth
Albania will have stable economic growth in the coming years, as the country benefits from a recovery in remittances and low oil prices.
However, growth will remain below potential due to continued overdependence on the agricultural sector and a major
shadow economy.
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
External Trade And Investment Outlook
Trade Deficit To Remain High
Albania's current account will remain firmly in deficit over the coming years due to the country's large trade deficit. However, a relatively
large stock of FDI and international reserves imply limited risks of a full-blown balance of payments crisis emerging in the
years ahead.
Outlook On External Position
TABLE: TOP 5 GOODS IMPORTS IN 2014
TABLE: TOP 5 GOODS EXPORTS IN 2014
Monetary Policy
No Further Rate Cuts In 2016
Despite subdued inflation , the National Bank of Albania (BoA) will not lower interest rates further in 2016 , due to a moderate recovery
in lending. However, the BoA's dovish stance will only partially deal with structural inefficiencies in Albania's economy.
Monetary Policy Framework
Chapter 2: 10-Year Forecast
The Albanian Economy To 2025
Regional Outlook Weighs On Trend Growth
Although we project real GDP to expand by 3.6% annually on average between 2015 and 2025, 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 3: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
Fewer Albanians To Seek Asylum In EU
The number of Albanians seeking asylum in Western Europe will decrease in 2016, as the potential for approval has become
negligible. However, Albania's poor economic situation will continue to put pressure on authorities to deal with structural inefficiencies
that prevent the country from lowering unemployment and increasing wages.
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.
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, 2014
Chapter 5: BMI Global Macro Outlook
Global Macro Outlook
Downside Risks Gather Momentum
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %
TABLE: MACROECONOMIC DATA & FORECASTS

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