S&P affirms Albania’s B/B ratings, raises outlook to positive

By bne IntelliNews October 13, 2014

Standard & Poor’s has affirmed Albania’s B/B long- and short-term sovereign credit ratings and revised the outlook to positive from stable on expectations that the government will reduce the budget deficit in the mid-term, the ratings agency said in a statement.

The rating agency sees Albania's fiscal deficit decreasing to below 5% of GDP in 2014 assuming tax clearance of arrears worth slightly below 2% of GDP. The fiscal gap should shrink to 2% of GDP in 2017, when all arrears will have been cleared.

The net general government debt burden is projected to decrease to 61% of GDP in 2017 from current 66%.

The rating agency noted that a sustained track record of tackling structural reforms, particularly in strengthening of property rights and rule of law, could prompt an improvement of the assessment of weaknesses in institutional and governance effectiveness. It sees Albania increasingly committed to structural reforms, especially in its legal system, after the EU decided in June 2014 to grant the country EU candidate status.

S&P would consider a positive rating action in the next 12 months if steady fiscal consolidation reduces general government deficits further during the period. At the same time, a resumption in real GDP growth, supported by the government's ongoing structural reform efforts, particularly in the areas of energy, the judiciary, property rights, and rule of law, could also support an upgrade, S&P noted.

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