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Albania Country Report - May, 2014

  • June 2014
  • -
  • Emerging Markets Direct Media Holdings
  • -
  • 25 pages

This report covers the main macroeconomic releases from May 8 to June 5 as well as the financial and political events that took place in Albania during this period.

A few months after the International Monetary Fund (IMF) agreed to provide Albania with a EUR 331mn credit to support the authorities' reform programme, the government signed two loan agreements totalling USD 220mn with the World Bank. The financing is aimed at supporting reforms to improve the country's fiscal sustainability through strengthening public financial management as well as at modernising the country's financial sector.

In a new forecast published in May, the World Bank confirmed expectations for Albania's economic growth saying it sees the GDP rising by 2.1% in 2014, in line with the government's forecast as well as estimates of the IMF. The European Bank for Reconstruction and Development (EBRD) also reiterated its forecast for a 1.7% growth in 2014. Both the EBRD and the World Bank said that growth will be supported by the government's plans to clear arrears to companies that had surged to more than 5% of GDP. Yet, it will exert pressure on the country's fiscal position.

Finance minister Shkelqim Cani said the government could borrow next year up to EUR 500mn via a second Eurobond issue or a syndicated loan.

Albania's general budget deficit narrowed by 73.1% y/y in January to April 2014 thanks to a 9.1% y/y increase in revenues coupled with a 5.9% y/y drop in expenditures. The end-April gap accounted for 0.5% of the projected full-year GDP, down from 1.8% in the same period a year earlier.

Consumer prices in the country grew by 1.7% y/y in April, slowing down from 2.2% in the previous month with the overall trend again determined by food prices that expanded by 1.8%.

Table Of Contents

Albania Country Report - May, 2014
EXECUTIVE SUMMARY3

MACROECONOMIC OVERVIEW5

World Bank confirms Albania's 2014 GDP growth projection at 2.1%5

EBRD keeps Albania's 2014 GDP growth forecast at 1.7%5

Albania signs USD 220mn loan agreements with World Bank5

IMF concludes first review of Albania's stand-by agreement6

Central bank cuts key rate to record-low of 2.50%8

Yields on two-year bonds edge up on low demand8

REAL SECTOR9

1.Inflation9

CPI inflation slows down to 1.7% y/y in April.9

Construction cost index edges up 0.2% y/y in Q1 201411

2.Industry and trade11

Tirana house price index drops 1.8% y/y in Q1 201411

FISCAL SECTOR12

FINANCIAL SECTOR14

Bank assets growth eases to 3.6% y/y at end-April 201414

Bank lending shrinks 2.1% y/y in April14

Insurers' gross premiums rise 26% in Jan-April16

Speed of Western banks deleveraging vis-a-vis CESEE stagnates in Q4 2013 - EBRD18

EXTERNAL SECTOR21

Balance of payments21

Foreign trade deficit widens 6.9% y/y in Jan-April21

PRIVATISATION AND INDUSTRY NEWS22

Slovenia's Adria Airways starts Tirana-Frankfurt flights.24

Arian Resources completes acquisition of Albanian assets24

China's Jiangxi Copper buys 50% of Turkish-owned Albanian mines24

POLITICS24

EC says Albania ready to obtain EU candidate country status24



Table 1 - Consumer price inflation10

Table 2 - Construction cost index11

Table 3 - Budget balance in Jan-April12

Table 4 - Bank profits15

Table 5 - Insurance premiums16

Table 6 - External position of BIS banks vis-a-vis all sectors in CESEE19

Table 7 - Foreign trade22



Figure 1 - Two-year bond yields8

Figure 2 - Consumer price inflation9

Figure 3 - Bank assets14

Figure 4 - Bank lending14

Figure 5- Foreign trade22

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