EBRD says Albania needs more fiscal measures to secure macroeconomic stability.

By bne IntelliNews November 16, 2011
Albanian authorities need to introduce further fiscal consolidation measures in order to secure macroeconomic stability, the EBRD said in its latest Transition Report. The bank recommended keeping the government debt bellow 60% of the GDP, while further reduction in budget expenditure would prevent from expansion of borrowing needs. Economic activity in Albania has started to decelerate in 2011 due to the weak performance in some of Albanias key EU markets. The EBRD revised downward its estimate for Albanias 2011 GDP growth to 1.9% y/y from 2.5% forecast in July and 3% y/y projected in May. Although negative contagion effects have so far been limited, Albanias close trading and investment ties to neighbouring Greece and Italy may affect the countrys economy in the short term. Consequently, the GDP growth is projected to further slow to 1% y/y in 2012. EBRD pointed out that Albanian banking sector remained resilient to the crisis and the private sector credit has recovered. However, strong policy actions will be required to support the banking sector considering the strong presence of Greek banks on the local market as well as the high level of euroisation in the economy. Referring to the ambitious privatisation program of the Albanian government, the EBRD said that the sales of state-owned assets should be concluded. Although this process is not expected to bring much-needed budget revenue, it will signal authorities commitment to market-oriented reforms, triggering substantial FDI inflows in the years to come.

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