D&B says credit environment in Albania remains difficult

By bne IntelliNews June 16, 2014

The credit environment in Albania has improved but still remains difficult, US commercial information and analysis company Dun & Bradstreet (D&B) said in its June 2014 RiskLine report. The weak credit activity on the Albanian market has been determined by the banks’ high perception of risk in the real economy, uncertainty over the fate of the banking sector, especially with regard to the local subsidiaries of Greek banks and the reluctance of many firms and households to take out further loans when they are already heavily leveraged. Albania's corporate sector still sees liquidity shortages, which is having a negative impact on domestic investment and the ability of firms to settle invoices on time.

D&B sees positive influence from the most recent monetary easing as well as the government’s commitment to pay off arrears to private-sector. This could inject liquidity into the real economy and would support reduction of non-performing loans.

In terms of political development, D&B noted that scepticism regarding granting EU candidate country status to Albania has increased after the latest progress report of the European Commission, which called for greater institutional cooperation and progress in tackling crime and corruption. According to the analysis, the rising influence of euro-sceptic parties after the EU elections, would have negative implications on any decision on Albania’s candidate country status application.

Albanian economy is rated as moderately risky and the country's overall risk profile has been on an deteriorating trend, D&B said. The rating (DB4c) implies a significant uncertainty over expected returns, while the deteriorating trend arises from adverse political, commercial, economic and external developments.

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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