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The international credit rating agency “Moddy’s” reconfirms the rating of the Albanian economy in “B1 – with a stable outlook”, in the recently published update.
The Agency estimates that the economic recovery was strong, broad-based and different from what was initially expected, with an increase of 8.9% in 2021, while Gross Domestic Product reached the level before the pandemic, in the second quarter of 2021. Among the factors that supported the growth, the agency notes that it has been fiscal and monetary policy. The Agency expects GDP growth to be steady in the future, with 4.5% in 2022 and 4.0% in 2023, supported by further recovery in the tourism sector, as well as stable domestic demand.
The agency estimates that the government debt burden, after growing significantly, reaching a peak of 77.6% of GDP in 2020, slightly decreased to 77.5% of GDP in 2021 and will continue its downward trajectory in the period 2022 – 2023 A gradual decline in the fiscal deficit and public debt to GDP is projected. The Agency forecasts the narrowing of the fiscal deficit to 4.6% of GDP in 2022 and 3.5% of GDP in 2023, while it predicts that public debt to GDP will continue in the downward trajectory in 2022 and 2023, decreasing to 75.7% and 74.7% respectively. PBB.
The agency predicts that consumer price inflation will remain above 3% in the first half of 2022 and then drop to 2.5% at the end of the year.
The Agency also expects the banking sector in Albania and government liquidity risk to remain subdued and the current account deficit to continue to narrow, to 5.6% of GDP in 2023, from 8.8% of GDP in 2020.
The sustainable perspective is also supported by policy continuity, especially in the context of reforms, within the EU accession process, as well as external imbalances at moderate levels.
The agency estimates that the main negative risk for our economic outlook may come from pandemic developments as well as the relatively low rate of vaccination. Also a protracted Russia-Ukraine conflict would pose an additional risk to the agency’s forecasts, as higher energy prices and / or weakening business and consumer confidence could have a negative impact on the domestic economy.
However, the agency estimates that Albania’s exposure to Russia, from energy or trade interdependence, is low and also to trade disruptions, as exports of goods to Russia and Ukraine accounted for 0.01% and 0.14% of total exports in 2020, respectively.
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