D&B rates Albania as moderately risky with deteriorating trend

By bne IntelliNews April 10, 2014

Albania's economy is rated as moderately risky and the country's overall risk profile has been on a deteriorating trend, US commercial information and analysis company Dun & Bradstreet (D&B) said in its March 2014 RiskLine report. The rating (DB4c) implies a significant uncertainty over expected returns, while the deteriorating trend arises from adverse political, commercial, economic and external developments.

In terms of the trade and commercial environment, the report notes that businesses operating in the country should be alert to the risk of flooding due to snow melting. There is also a risk of landslides affecting transport links given that many road and rail lines are situated along unstable slopes. Businesses need to be prepared for delays and complications when transporting goods through out the country’s territory and across the country’s external border.

From macroeconomic point of view, the outlook for growth has improved. Given the burden of indebtedness and other impediments in the domestic economy, the primary source of growth will be exports. Producers of commodities, electricity and manufactured products, such as textiles and footwear, will benefit from greater overseas sales and generate positive spillover effects for various ancillary industries.

As regards to risk factors, D&B positively assesses the government’s commitment to improve the collection rate for electricity consumption. The authorities have set a task force with the idea to compel debtors to settle their arrears. According to the state, about EUR 140mn goes unpaid each year, and that 90% of households and 80% of businesses are in arrears to the power distributing company.

D&B bnoted that the political risk has risen after the European Council rejected Albania’s application for the status of candidate for membership of the EU at the end of 2013. This followed objections by major states such as the UK, France and Germany that Albania had not yet proved its readiness against indicators such as corruption and institutional stability.

The DB risk indicator provides a comparative, cross-border assessment of the risk of doing business in a country and encapsulates the risk that country-wide factors pose to the predictability of export payments and investment returns over a two year time horizon.

The indicator is a composite index of four over-arching categories: political risk, commercial risk, external risk and macroeconomic risk. It is divided into seven bands, ranging from DB1 through DB7.

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