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Albania Business Forecast Report Q1 2015

  • November 2014
  • -
  • Business Monitor International
  • -
  • 39 pages

Core Views

A lbania’s economy will remain on a low growth trajectory over the coming years.
Weak exports and anaemic private consumption will contribute to the country’s economy losing ground on many other regional peers. A iling eurozone demand will restrict export growth and contribute to Albania’s current account deficit widening again over the next few years.
Declining inflation expectations, weak bank lending and sluggish domestic demand will keep the Albanian central bank in a dovish mode.
Rising tensions with Serbia and a lack of progress implementing fiscal reforms suggests full EU membership remains a distant prospect. Major Forecast Changes
E ven weaker demand from key eurozone trading partners (mainly Italy) has prompted us to downgrade our real GDP forecasts to 2.5% in 2015 and 3.0% in 2016, from 2.8% and 3.5% previously. T his same trend has prompted us to revise down our current account deficit forecasts to 12.4% of GDP in 2015 and 13.2% in 2016.

Table Of Contents

Albania Business Forecast Report Q1 2015
Executive Summary 5
Core Views 5
Major Forecast Changes 5
Key Risks To Outlook 5
Chapter 1: Political Outlook 7
SWOT Analysis 7
BMI Political Risk Index 7
Domestic Politics 8
EU Membership A Distant Prospect 8
While Albania has made progress implementing structural reforms over the past few years, full EU membership remains a distant
prospect. Difficulties tackling the public debt load and corruption will hamper accession efforts.
Table: POLITICal overview 8
Foreign Policy 9
Progress Improving Serb Relations To Stall 9
A violence-marred football match between Albania and Serbia will push back the normalisation of relations between the two countries.
Rising nationalist tensions will cast doubts on further progress on EU integration,particularly for Serbia.
Long-Term Political Outlook 10
Stumbling Towards The EU 10
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. Key risks through 2023 will largely revolve
around EU accession progress, and we also highlight a possible deterioration in regional relations over the 'Kosovo Issue' as a particular
flashpoint of instability.
Chapter 2: Economic Outlook 13
SWOT Analysis 13
BMI Economic Risk Index 13
Economic Activity 14
Slipping Further Behind CEE 14
Albania's economic recovery will remain hamstrung by sluggish consumer spending and ailing demand from key eurozone export
markets. Significant structural reforms are needed to prevent the country slipping further behind South-East European economies.
Balance Of Payments 16
Wider Trade Deficits To Weigh On Growth 16
Ailing eurozone demand will restrict export growth and contribute to Albania's current account deficit widening again over the next few
years.
Table: Balance Of Payments 16
Monetary Policy 18
Central Bank To Remain Dovish Amid Crisis 18
Declining inflation expectations, weak bank lending and sluggish domestic demand will keep the Albanian central bank in a dovish mode
over the coming quarters. Low interest rates will be insufficient to kick start the country's faltering economic recovery.
Table: Monetary Policy 18
Chapter 3: 10-Year Forecast 21
The Albanian Economy To 2023 21
Regional Outlook Weighs On Trend Growth 21
Although we project real GDP to expand by 3.4% between 2014 and 2023, we caution that Albania is expected to remain one of the
least developed states in South East Europe. While small-scale export-orientated 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. Despite a low base, we see a relatively uninspiring
macroeconomic trajectory for Albania, as subdued economic growth in key economic partners Greece and Italy, as well as ongoing
political instability, make a return to pre-financial crisis growth rates unlikely.
Table: Long-Term Macroeconomic Forecasts 21
Chapter 4: Operational Risk 23
Operational Risk Index 23
Operational Risk 24
table: South East Europe - Labour Market Risk 24
Logistics Risks 27
table: South East Europe - Logistics Risk 28
Crime And Security 31
Table: South East Europe - Crime And Security Risk 31
Trade And Investment Risk 32
Table: South East Europe - Trade And Investment Risk 33
Table: Main Import Products, 2012 35
Chapter 5: BMI Global Assumptions 37
Global Outlook 37
Reality Check: Uncertainty Reigns 37
Table: Global Assumptions 37
Table: Developed States, Real GDP GrowtH, % 38
Table: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, % 38
Table: Emerging Markets, Real GDP Growth, % 39

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