Moodys says structural reforms in Albania essential for economic growth.

By bne IntelliNews August 22, 2011
Sustainable economic development in Albania depends on the implementation of structural reforms in the country, The FINANCIAL reported citing Moodys annual credit analysis on Albania. Since Albania is ranked as middle-income country, it feels pressure from both higher-income, higher-productivity countries and from those with lower cost bases. The country faces challenges in returning to pre-crisis level of economic development, when the GDP grew more than 6% on average. Moodys noted that institutional strength in Albania is currently low. The agency referred to the most recent ranking of the World Bank, showing low scores on government effectiveness and the rule of law. However, stronger capacity of state institutions in the country will increase country attractiveness for foreign investments, thus supporting economic development. Fiscal policy should be based on rather realistic approach, since optimistic growth assumptions resulted in mid-year budget revision. Furthermore, Albanias debt to GDP ratio is high and any reduction is likely to be limited in the near term. Although the economic base is showing some signs of broadening, especially in the energy sector, the current account deficit still poses potential risks to the currency. On the other hand, Moddys assessed Albanias financial sector as stable, since the banking sector is currently well capitalized. Finally, Moodys pointed out that political clashes between the main parties in Albania hamper the countrys attempt to get EU candidate status. As a candidate, Albania would rely on extensive assistance from the EU. We remind that the agency assigned the first ever sovereign rating for Albania in June 2007. The country got a sub-investment grade country ceiling of Ba1 for foreign currency bonds and B1 rating for the debt obligations of the government of Albania.

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