TIRANA (Albania), April 5 (SeeNews) – Albania's economic growth is expected to slow to 3.8% in 2019 and 3.6% in 2020, from an estimated 4.2% last year, as energy production is expected to return to normal levels, the World Bank said on Friday.
Growth will depend on the pace of reform implementation, including in the area of business environment, infrastructure and closing the labour force skills gap and progress in EU accession, the World Bank said in an Economic Update for Europe and Central Asia.
Economic growth in 2018 was led by favourable hydrological conditions which supported energy production, the global lender noted, adding that higher growth translated into job creation and a steady decline in unemployment.
In 2019, Albania's economic growth will continue to be led by domestic demand, with consumption expected to grow by around 3.4% annually, followed by fixed capital formation growth, 3% per year, the World Bank said.
Net exports are also expected to support growth in 2019, albeit to a lesser extent, as imports expand in line with domestic consumption. As in the past, poverty is expected to react weakly to economic growth, falling steadily but slowly to reach about one-third of the population by 2020.
Contained spending and currency appreciation helped reduce public debt to an estimated 68.6% of GDP at the end of 2018 from 71.8% in the previous year, but off -balance risks including from public-private partnership (PPP) agreements are mounting, the World Bank noted.
According to the report, public debt is expected to deop further to 65.8% in 2019 and 64.7% in 2020.
“Over the medium-term, risks are significant. Albania is vulnerable to a slowdown in Europe, particularly among its main trading partners.”
A slowdown in these countries could spill over through lower exports, remittances, and foreign direct investment (FDI).
"In addition, the expected tightening of monetary policy in external markets will increase financing costs for Albania in the context of a high public debt, which is increasingly being refinanced through foreign sources.”
Albania was granted EU candidate status in 2014 and hopes to launch membership negotiations later this year.