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Moddy’s confirms “B1” rating for Albania, Denaj: Support for launched reforms, impetus for EU integration process

  • 5/22/2021 8:47 AM
Moddy’s confirms “B1” rating for Albania, Denaj: Support for launched reforms, impetus for EU integration process

Moddy’s confirms for Albania the current rating in “B1”, as well as with a “stable” perspective.

This fact was announced by the Minister of Finance, Anila Denaj. According to her, Albania entered the pandemic, with a stronger fiscal position, thanks to improvements in recent years. She also stressed that the medium-term growth prospects remain favorable.
The reforms undertaken as well as the support measures for the citizens and the business by the Government, made the Albanian economy to have a stability. In its most recent "in-depth" review (May 21, 2021), the international rating agency Moddy's confirms for Albania the current rating in "B1", as well as with a "stable" perspective.

The agency estimates that the Albanian economy was significantly affected by the pandemic, as the shock came at a time when the economic situation had already begun to weaken since the November 2019 earthquake and also where the impact was intensified by the significant dependence of the economy on the tourism sector. However, the agency estimates that the Albanian economy was generally resistant to the pandemic.

Macroeconomic stability was maintained and contracting was softer than initially expected and also compared to countries in the region. The agency predicts that economic growth will return to 2021 and also estimates that the prospect of medium-term growth remains favorable.

The agency predicts that public debt, after a significant increase in 2020, will return to a downward trajectory. Albania entered the pandemic with a stronger fiscal position thanks to improvements in recent years. During the four years before the pandemic (2016-2019) the average deficit was 1.8% of GDP and debt was placed on a downward trajectory, which enabled a fiscal space to respond to the shock. The response to the pandemic hit was relatively smaller compared to some countries in the region, it is estimated to have been timely and well-entertained.

The authorities signaled in July 2020 their determination towards fiscal consolidation by making further amendments to the Budget Organic Law (LOB), which includes a legal obligation according to which the primary balance must be not less than zero (balanced) starting from fiscal 2023 onwards.

The agency estimates that while the implementation of the medium-term revenue strategy was delayed due to the pandemic and the election year, improving revenue collection remains a key element in enabling the large capital investments projected over the medium term.

The Agency also estimates that weaknesses in the external position of the economy remain contained despite the impact of the pandemic, which predicts that the current account deficit, after a temporary expansion in 2020 as a result of the sharp decline in tourism revenues and remittances, from 2021 will return to pre-pandemic levels and will be largely covered by foreign direct investment inflows. Also, the level of the country's foreign exchange reserves remains adequate.

Finally, the agency estimates that it envisages a continuation of policy-making in support of the implementation of reforms under the impetus of the EU integration process.

/Klara Ruci/