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Albania Country Risk Report Q3 2015

  • May 2015
  • -
  • Business Monitor International
  • -
  • 39 pages

Core Views
Albania’s economy will remain on a low growth trajectory over the coming years, unless more structural reforms can be implemented to tackle longstanding issues of competitiveness and corruption. The recovery will mainly be built on improving consumer spending. This is sub-optimal due to low incomes and the country’s small
consumer base.

The country’s fiscal position will continue posing risks, with a public debt load of over 70% among the highest in the region. A widening current account deficit suggests an increased reliance on IMF funding in the financial account. Albania’s already poor relationship with Serbia looks set to worsen over the Kosovo issue. This will dent Albania’s and Serbia’s progress towards EU accession.

Table Of Contents

Albania Country Risk Report Q3 2015
Executive Summary.. 5
Core Views...5
Key Risks To Outlook.5
Chapter 1: Political Outlook. 7
SWOT Analysis... 7
BMI Political Risk Index. 7
Domestic Politics .. 8
Relations With Serbia To Deteriorate Further...8
Relations between Serbia and Albania will deteriorate further over the coming months, over the status of neighbouring Kosovo. Rising
nationalistic tensions between the pair will weigh on the Albania's EU credentials in 2015.
TABLE: Political Overview ..8
Long-Term Political Outlook. 9
Stumbling Towards The EU9
We expect Albania to continue progressing towards EU membership over the next decade, although 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 governance. Key risks through 2024 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
Growth To Remain Below Potential.14
Albanian economic growth rates will remain subdued by historical standard in 2015. A lack of sustainable growth drivers suggests real
GDP growth will remain tepid in the absence of more structural reforms.
TABLE: Economic Activity...14
Balance Of Payments .. 16
Cannot Export Its Way Out Of Trouble16
Albania's current account deficit will continue to widen in 2015 as the country's large trade deficits expand once again. This implies there
is still slim hope of the country exporting its way on to a faster economic growth trajectory over the coming quarters.
TABLE: Balance Of Payments16
Fiscal Policy . 18
Budget Deficit Targets Look Optimistic..18
Albania will make gradual progress reducing its budget deficit over 2015 and 2016, but will miss ambitious fiscal deficit targets
supported by the IMF. The Socialist government will remain wary of excessive austerity as local government elections approach this
TABLE: Fiscal Policy.18
Monetary Policy ... 19
Central Bank Remains Committed To Boosting Domestic Demand19
The National Bank of Albania ( BoA ) will remain firmly in dovish mode in 2015, in an attempt to boost weak domestic lending and
subdued domestic demand. Looser monetary policy will be insufficient to compensate for structural inefficiencies in the economy,
implying a strong recovery in private consumption remains some way off in the country.
TABLE: Monetary Policy.19
Chapter 3: 10-Year Forecast... 21
The Albanian Economy To 2024. 21
Regional Outlook Weighs On Trend Growth..21
Though we p roject real GDP to expand by 3.5 % between 2014 and 2024, we caution that Albania is expected to remain one of the
least developed states in South East Europe. W hile 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. 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
SWOT Analysis. 23
Operational Risk Index 23
Operational Risk... 24
Table : Sout h East Eur ope - Lab our Market Risk .24
Table : Sout h East Eur ope - Logistics Risk 28
Table : Sout h East Eur ope - Crime And Securit y Risk 31
Table : Sout h East Eur ope - Trade And Investment Risk ...33
Table: Main Import Products, 2012.35
Chapter 5: BMI Global Macro Outlook... 37
Global Outlook.. 37
EMs Still Slowing...37
Table: Global Assumptions..37
Table: Developed States, Real GDP GrowtH, %38
Table : Emerging Markets , Real GDP Growt h, %...39

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