World Bank lowers Albanias 2012 GDP forecast to 2%.

By bne IntelliNews November 16, 2011
Albanias economy is expected to grow by 2% y/y next year, the World Bank said in its South East Europe Regular Economic Report, revising down the countrys growth from an earlier expected 4.7%. The bank also cut by 1pps its estimate for Albanias economic growth for this year to 3% y/y. The downgrade is due to the turbulence in the eurozone and the deterioration of the economic prospects for the EU and US, which have shaken investor and business confidence. Further global slowdown and uncertainties for the outcome of eurozones debt crisis in the could have a negative effect on trade, FDI inflows, remittances and foreign funding for local banks in Albania and other countries from the Western Balkans as well, the bank said. Albanian government needs to accelerate fiscal expenditure consolidation and the introduction of fiscal buffers is required. While budget deficit is expected at around 3% of the GDP in 2012, the current debt level is approaching the statutory limit of 60% of GDP. Albania is the most vulnerable economy in the region with debt accounting for more than double the annual revenues, reads the report. We note that, the IMF has also warned that Albanian economy faces increasing challenges from its high public debt. The fund revised downward its projection for Albanias 2012 economic growth to 1.5% from an earlier expected growth of 3.5%. Albanian government remains rather optimistic projecting a 4.3% y/y real GDP growth for 2012.

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