Elections may slow structural reforms, 2017 growth at 3.7%: IMF report on Albania
Albania’s economic growth this year will accelerate to 3.7%, emphasizes the International Monetary Fund in its latest report on Albania following the conclusion of the three-year program.
These projections are above those of other international institutions like the World Bank and the European Commission, which claim an increase to 3.5%, but even of the latest projections on the Albanian government, pointing to a growth rate of 3.5%.
This growth continues, claims IMF, will boost from foreign direct investment, mainly in the energy sector, as well as a strong domestic demand. Consequently, inflation will go up to 2.6%, states the Fund.
Even in medium-term, the International Monetary Fund is highly optimistic for the Albanian economy, since it predicts a growth rate of over 4%.
But the institution also highlights two main risks. Firstly, the June general elections, which could slow the implementation of structural reforms, especially fiscal consolidation.
Secondly, the weakness of the euro area, which could have an effect on our country, undermining efforts to reduce public debt.
As regards income, IMF notes that there will be some progress in the coming years, mainly due to the implementation of the tax on luxury cars and approaching cigarette excise at European standards starting from 2018.
On the other hand, regarding the expenditure, the IMF notes: “The budget allows a moderate increase in wages and pensions, keeping the wage bill in relation to gross domestic product at the same level with 2016, as well as by keeping unchanged the minimum wage in the public sector “.
This is included in the priorities of the monitoring mission that the institution will have with the completion of the three year program.
Competitiveness has been hit by structural deficiencies, and in this regard reforms should be put in place, claims IMF, noting that these reforms are essential to improve the business climate.
Regarding the banking sector, the Fund estimates that is well capitalized, even beyond the required “Lending to the private sector is recovering, shifting from euro currency in the local currency, and from large corporations to small and medium enterprises“, notes the International Monetary Fund.
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