EBRD has trimmed down the projection for growth for many countries, while maintained its projection for Albania's gross domestic product (GDP) growth at 3.3% in 2016 and projected a 3.5% expansion for 2017.
EBRD sees the Albanian economy picking momentum, but that still will require an active fight against informality and reduction of non-performing loans which is critical for restoring credit growth.
"GDP growth is likely to accelerate to 3.3 per cent in 2016 on the back of a revived investment cycle, in particular in the energy sector, including the start of major construction work on the Trans-Adriatic gas Pipeline (TAP)," EBRD said in its latest Regional Economic Prospects report.
It noted that the government's high-profile campaign to reduce informality in the economy has started yielding results in terms of increased business registration, but fiscal challenges remain significant.
The Albanian economy performed steadily in 2015, successfully withstanding the impact of severe flooding in the south of the country in February and recording 2.6 per cent growth for the year as a whole.
In September 2015 the government initiated a high-profile campaign to reduce informality in the economy, and some results are already evident in terms of increased business registration, says the report of the European Bank for Reconstruction and Development, published the other day.
Fiscal challenges remain significant for Albania, but the IMF programme remains on track and agreement at staff level on the seventh review was reached in March 2016.
In order to increase the lending to the economy, the EBRD report suggests Albania needs a new model of financing the economy. In December of last year, Peter Sanfey, Acting Director, Country and Sector Economics of EBRD stressed the need of easing crediting for boosting the investment in the economy as Albania holds so much potential and financing is key.
Lending in recent years has undergone a significant slowdown and continues to rely entirely on the banking sector. Lack of capital market remains a problem to provide financing of new investments and more cost competitive. “Bank of Albania has taken concrete steps to promote the demand and supply of credit. These measures are aimed at lowering the cost of financing, handling loans, the introduction of prudential supervisory rates on lending in foreign currency and promoting the restructuring of loans. Also, we have drawn attention to banks and businesses that their business strategies need to be more rational and forward-looking”, said earlier BoA Governor Genti Sejko.
Meantime another sector which has seen growth is energy, due also to the reform taken in the sector, which represents a decisive step forward on the long path of moving towards energy sustainability and the construction of the Trans Adriatic Pipeline.
TAP AG intends to invest €60 million in Albania’s road infrastructure. And the value of “spillover” benefits from this investment is likely to fall between: €237 - €1,107 million over the proceeding 20 years. Evidence from other studies suggests that the true value is likely to be towards the higher end of this range.
But most importantly it will give our economy the boost it craves for so long. Even this year projection of 3.3% economic growth, according to EBRD will be attributed also to the construction of the pipeline, which is foreseen to boost the economy. EBRD projection is encouraging for the growth of the Albanian economy, although some challenges stand on the way, which will need to be tackles so we have the solid numbers of economic growth./AgroWeb.org/