Albania needs to achieve sustainable fiscal adjustment in 2014, the European Bank for Reconstruction and Development (EBRD) said in its Transition Report 2013. The country's budget deficit more than doubled in the first half of 2013, rising to 3.4% of the projected full-year GDP, which was mainly due to pre-election spending hike, the bank said. This resulted in a further rise of the public debt. In addition, the authorities removed the statutory limit of the public debt to accommodate the expected rise. In this regard, restoration of a fiscal anchor is needed for 2014, EBRD said, noting that the IMF has also requested Albanian authorities to reintroduce the fiscal rule.
Progress on the key remaining privatisations has been mixed and further progress is needed. The EBRD noted that prolonged dispute with the Czech energy group CEZ is having an adverse impact on foreign investor confidence, both in the sector and more broadly in the economy.
Finally, the rising share of non-performing loans risks the overall stability of the financial sector, EBRD said calling for urgent measures in this regard.
Albania received the highest transition indicator scores (3+) for telecommunication sector and for sustainable energy. The country has its lowest score (1) in terms of private equity. The transition indicators range from 1 to 4+, with 1 representing little or no change from a rigid centrally planned economy and 4+ representing the standards of an industrialised market economy.
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