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European Commission’s evaluation for the economic situation in Albania

By   /   16/02/2017  /   Comments Off on European Commission’s evaluation for the economic situation in Albania

“The growing political insecurity relating to the June 2017 parliamentary elections may affect consumption and investments”, says the economic projection

The European Commission has published the Winter economic projection for EU member countries and associate member countries. The summary on Albania stresses that “domestic demand remains the only ‘remedy’ of the country’s economy. The gradual economic growth (from 3.3% in 2016 to 3.5 for this year and 3.6% during 2018) is based on household expenses and private investments. An accommodating position of the monetary policy, the improvement of the market and direct foreign investments are supposed to back consumer spending and business investments in the coming years”, the document says.

The document also projects a drop of fiscal deficit and public debt, but stresses that “the engagement of the government for fiscal consolidation may be tested at the end of the IMF’s program and through the upcoming elections”.

“The growth of political insecurity relating to the June 2017 general elections, may affect consumption and investments”, says the winter economic projection. “Recovery of the economy may take longer than it should have due to the number of nonperforming loans, which continues to be high”.

The implementation of structural reforms “such as the one that has just started in the justice system, may improve the business environment and the long term potential for economic development”.

Meanwhile, a slight real increase of exports is expected to take place in the two coming years, while the growth of domestic demand is expected to avoid imports, resulting in a negative contribution for development (economic growth) from the external sector, especially during 2017. The high deficit of the current account is expected to go up next year up to 13.1% of GDP (as opposed to a current 11.8%).

The growing tendency of investments will continue and this mainly relates to two big projects in the energy sector, which require extra direct foreign investments, especially in 2017.

Supposing that current policies remain unchanged, the reduction of budget deficit is expected to continue in line with the current fiscal strategy of the government, leading to a gradual reduction of public debt.

But, fiscal projection is related to two significant risks, according to the European Commission. “First of all, the government may reduce taxes due to the upcoming elections. The second risk is the finalization of the agreement with IMF in February 2017, which means that “the government’s strategy for consolidation may lost an important point of support”, says the winter economic projection for Albania. /balkaneu.com/

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