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Albania Country Risk Report Q1 2017

  • November 2016
  • -
  • Business Monitor International
  • -
  • 43 pages

Core Views

Decelerating construction activity growth and the likely fallout from Brexit will negatively impact Albania's economy. Nevertheless, a large infrastructure investment pipeline will keep foreign direct investment levels elevated and ensure regional real GDP growth outperformance over the coming years. Successful passage of several pieces of legislation aimed at improving judicial independence suggests a more robust 'policy-making' profile, which could see the initiation of Albania's EU accession talks. Major Forecast Changes We have lowered our real GDP growth forecast for Albania to 3.3% for 2017 and 2018, and 3.5% for 2019, down from 3.6% in 2017 and 2018 and 3.8% in 2019 previously.

Table Of Contents

Albania Country Risk Report Q1 2017
Executive Summary 5 Core Views 5 Major Forecast Changes 5 Key Risks5 Chapter 1: Economic Outlook7 SWOT Analysis 7 BMI Economic Risk Index 7 Economic Growth Outlook 8 Brexit To Dampen Robust Growth Performance 8 Decelerating construction activity growth and the likely fallout from Brexit will negatively impact Albania's economy Nevertheless, a large infrastructure investment pipeline will keep foreign direct investment levels elevated and ensure regional real GDP growth outperformance over the coming years TABLE: KEY INFRASTRUCTURE PROJECTS 9 GDP By Expenditure Outlook 10 TABLE: GDP GROWTH FORECASTS 10 Fiscal Policy And Public Debt Outlook11 Debt A Key Risk, Despite Consolidation Efforts11 While remaining a key source of risk, Albania's public debt load has peaked and is set to decline from 2016 onwards Sustained fiscal consolidation, alongside robust nominal GDP growth, will put debt on a downwards trajectory TABLE: FISCAL AND PUBLIC DEBT FORECASTS 11 External Trade And Investment Outlook 12 Current Account Deficit Will Be Covered By FDI 12 With Albania's current account set to remain firmly in deficit over the coming years, the country will continue to cover its external financing needs with inward foreign direct investment and FX reserves TABLE: CAPITAL and FINANCIAL ACCOUNT BALANCE 12 TABLE: CURRENT ACCOUNT BALANCE FORECASTS13 TABLE: TOP 5 GOODS IMPORTS IN 2015 13 TABLE: TOP 5 GOODS EXPORTS IN 201513 Monetary Policy 14 Inflation Set To Return Strong 14 Albania's Consumer Price Index (CPI) will remain vulnerable to changes in food and energy prices in the years ahead Rising global energy prices and strong domestic inflationary pressures will see CPI growth accelerate in H117 TABLE: MONETARY POLICY FORECASTS 14 Chapter 2: 10-Year Forecast 17 The Albanian Economy To 2025 17 Regional Outlook To Weigh On Trend Growth 17 Although we project real GDP to expand between 2016 and 2025, we caution that Albania is expected to remain one of the leastdeveloped states in Southeast Europe Despite a low base, we see a relatively uninspiring macroeconomic trajectory for Albania, as subdued economic growth in key trading partners and modest increases in domestic demand make a return to pre-financial crisis growth rates unlikely TABLE: LONG-TERM MACROECONOMIC FORECASTS 17 Contents Chapter 3: Political Outlook 19 SWOT Analysis 19 BMI Political Risk Index19 Domestic Politics20 Reforms Favour Political Risk Profile 20 Successful passage of several pieces of legislation aimed at improving judicial independence suggests a more robust 'policy-making' profile, which could see the initiation of Albania's EU accession talks This has seen us upgrade Albania's Short-Term Political Risk index score more closely in line with the Central and Eastern European average TABLE: POLITICAL OVERVIEW 20 Long-Term Political Outlook 21 Stumbling Towards The EU 21 We expect Albania to continue progressing towards EU membership over the next decade, though we 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 to 2025 will largely revolve around the EU accession progress and we highlight a possible deterioration in regional relations over 'Greater Albania' as a particular flashpoint of instability In addition, the ongoing financial and economic instability in the eurozone will likely mean EU enlargement is not prioritised Chapter 4: Operational Risk 25 Operational Risk 25 TABLE: SOUTHEAST EUROPE - LABOUR MARKET RISK25 TABLE: SOUTHEAST EUROPE - LOGISTICS RISK 28 TABLE: SOUTHEAST EUROPE - CRIME AND SECURITY RISK 33 TABLE: SOUTHEAST EUROPE - TRADE AND INVESTMENT RISK 34 TABLE: MAIN IMPORT PRODUCTS, 2014 35 Chapter 5: BMI Global Macro Outlook39 Global Macro Outlook 39 Austerity Has Peaked, But Populism Is Not Yet Policy 39 TABLE: GLOBAL ASSUMPTIONS39 TABLE: DEVELOPED STATES, REAL GDP GROWTH, % 40 TABLE: EMERGING MARKETS, REAL GDP GROWTH, % 41 TABLE: MACROECONOMIC DATA and FORECASTS 43

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