Albania Business Forecast Report Q1 2015

Date: November 15, 2014
Pages: 39
US$ 1,195.00
Report type: Strategic Report
Delivery: E-mail Delivery (PDF), Download
ID: ADF2E351028EN

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Albania Business Forecast Report Q1 2015
Core Views

Albania’s economy will remain on a low growth trajectory over the coming years.

Weak exports and anaemic private consumption will contribute to the country’s economy losing ground on many other regional peers. A iling eurozone demand will restrict export growth and contribute to Albania’s current account deficit widening again over the next few years.

Declining inflation expectations, weak bank lending and sluggish domestic demand will keep the Albanian central bank in a dovish mode.

Rising tensions with Serbia and a lack of progress implementing fiscal reforms suggests full EU membership remains a distant prospect.

Major Forecast Changes

Even weaker demand from key eurozone trading partners (mainly Italy) has prompted us to downgrade our real GDP forecasts to 2.5% in 2015 and 3.0% in 2016, from 2.8% and 3.5% previously.

This same trend has prompted us to revise down our current account deficit forecasts to 12.4% of GDP in 2015 and 13.2% in 2016.
Executive Summary
Core Views
Major Forecast Changes
Key Risks To Outlook


SWOT Analysis
BMI Political Risk Index
Domestic Politics
EU Membership A Distant Prospect
While Albania has made progress implementing structural reforms over the past few years, full EU membership remains a distant prospect. Difficulties tackling the public debt load and corruption will hamper accession efforts.
  Table: POLITICal overview
Foreign Policy
Progress Improving Serb Relations To Stall
A violence-marred football match between Albania and Serbia will push back the normalisation of relations between the two countries. Rising nationalist tensions will cast doubts on further progress on EU integration,particularly for Serbia.
Long-Term Political Outlook
Stumbling Towards The EU
We expect Albania to continue progressing towards EU membership over the next decade, though caution that forward momentum will be sluggish. Lack of institutional development and endemic corruption remain key challenges to stability over the long term, whose presence will diminish efforts to address systemic problems regarding weak go vernance. Key risks through 2023 will largely revolve around EU accession progress, and we also highlight a possible deterioration in regional relations over the 'Kosovo Issue' as a particular flashpoint of instability.


SWOT Analysis
BMI Economic Risk Index
Economic Activity
Slipping Further Behind CEE
Albania's economic recovery will remain hamstrung by sluggish consumer spending and ailing demand from key eurozone export markets. Significant structural reforms are needed to prevent the country slipping further behind South-East European economies.
Balance Of Payments
Wider Trade Deficits To Weigh On Growth
Ailing eurozone demand will restrict export growth and contribute to Albania's current account deficit widening again over the next few years.
  Table: Balance Of Payments
Monetary Policy
Central Bank To Remain Dovish Amid Crisis
Declining inflation expectations, weak bank lending and sluggish domestic demand will keep the Albanian central bank in a dovish mode over the coming quarters. Low interest rates will be insufficient to kick start the country's faltering economic recovery.
  Table: Monetary Policy


The Albanian Economy To 2023
Regional Outlook Weighs On Trend Growth
Although we project real GDP to expand by 3.4% between 2014 and 2023, we caution that Albania is expected to remain one of the least developed states in South East Europe. While small-scale export-orientated manufacturing will begin to take on a more prominent role over the next few years, remittance inflows from expatriate migrant workers will remain a key source of foreign capital, underscoring the relatively nascent stage of economic development in the Western Balkan state. Despite a low base, we see a relatively uninspiring macroeconomic trajectory for Albania, as subdued economic growth in key economic partners Greece and Italy, as well as ongoing political instability, make a return to pre-financial crisis growth rates unlikely.
  Table: Long-Term Macroeconomic Forecasts


Operational Risk Index
Operational Risk
table: South East Europe - Labour Market Risk
Logistics Risks
table: South East Europe - Logistics Risk
Crime And Security
  Table: South East Europe - Crime And Security Risk
Trade And Investment Risk
  Table: South East Europe - Trade And Investment Risk
  Table: Main Import Products, 2012


Global Outlook
Reality Check: Uncertainty Reigns
  Table: Global Assumptions
  Table: Developed States, Real GDP GrowtH, %
  Table: Emerging Markets, Real GDP Growth, %
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