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Albania was ranked 11th in Europe in 2021 for the high level of public debt, in relation to the size of the economy.
According to the Ministry of Finance public debt in 2021 was 78.5% of Gross Domestic Product (GDP). Other Eurostat data rank Albania after Greece, Italy, Portugal, Spain, France, Belgium, Cyprus, Montenegro, Austria and Croatia (see chart below). While in the region, Albania is second, after Montenegro.
Other countries in the region have lower debt levels, Serbia and Northern Macedonia with 58% of GDP each, Bosnia at 36% and Kosovo among the lowest debts in Europe, with 22% of GDP.
All countries rapidly increased debt in 2020, with the aim of reviving the economy in the aftermath of the pandemic. In Albania the debt increased by almost 10 percentage points and it continued to remain high in 2021. Although the debt increased at one of the highest rates in Europe, the economic support for the pandemic was lower in Europe, with less than 1% of GDP, according to data from the International Monetary Fund (IMF).
A country’s ability to pay off debt is dependent on its competitiveness. The lower it is, the lower the solvency. Albania is ranked by the Global Economic Forum as the country with the lowest competitiveness in Europe.
Both the World Bank and the IMF have often advised the government, often the Albanian government, to be prudent with spending and fiscal consolidation. The World Bank, in its latest report on Central Europe and Asia “War in the Region”, has been harsh on Albania’s high level of debt and has warned that its refinancing may be at risk and that the government may be forced to reduce its capital expenditures, writes Monitor.
“In the baseline scenario, public debt is expected to fall slightly to 78.1% of GDP in 2022 and more significantly in the medium term. However, the fiscal balance may deteriorate further if the international environment is unfavorable, forcing the government to cut capital expenditures to prevent an increase in the debt-to-GDP ratio, the bank warns.
Debt in Europe
According to Eurostat, at the end of the fourth quarter of 2021, the ratio of government debt to GDP in the euro area was 95.6%, compared to 97.5% at the end of the third quarter of 2021. In the EU, the ratio also decreased by 89.9% . at 88.1%.
For the euro area, the decrease in the ratio of government debt to GDP comes as a result of GDP growth and a slight decline in nominal debt in absolute terms, while for the EU nominal debt continued to grow slightly, but was exceeded. from GDP growth.
Compared to the fourth quarter of 2020, the ratio of government debt to GDP fell in both the euro area (from 97.2% to 95.6%) and the EU (from 90.0% to 88.1%). The decrease was due to GDP growth that exceeds the growth of government debt./Monitor/
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