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Albania’s GDP growth to decelerate in 2019 amid lower power output, economic slowdown in EU – IMF

Albania’s GDP growth to decelerate in 2019 amid lower power output, economic slowdown in EU – IMF IMF Author (bnm) License: all rights reserved.

TIRANA (Albania), July 4 (SeeNews) – Albania’s economic growth is expected to slow down to 3.5% in 2019 from an estimated 4.1% in 2018, due to the base effect of last year's peak in power generation and the economic slowdown in the country’s main partner countries, the International Monetary Fund (IMF) said.

“Albania’s medium-term economic outlook is broadly favourable,” the IMF said in a statement late on Wednesday, after the conclusion of the second Post-Program Monitoring (PPM) mission.

The IMF also said inflation is expected to converge slowly towards its 3% target by 2021, as the output gap narrows and imported inflation from the euro area recovers.

“The current account deficit is projected to narrow further over the medium term, supported by strong export growth and planned fiscal consolidation. The level of FX reserves remains comfortable,” the IMF noted.

According to the IMF team, despite the favourable environment and positive short-term outlook, Albania is exposed to the increasing risks to growth in the EU, notably in its main trading partners. At home, the vulnerabilities are primarily in the public sector, arising from high public debt, increasing contingent liabilities, and weaknesses in public institutions and economic governance in general, and include demographic prospects and heavy dependence of growth on weather conditions, the Fund also said.

The Fund urged the authorities to put in place a more consistent framework for public investment management, and to limit the risks from public–private partnership (PPPs) and other contingent liabilities.

The energy sector's endemic financial weakness and accumulating arrears necessitate urgent financial restructuring, combined with continued actions to liberalise it and unbundle its key players, the Fund noted.

The IMF also said that debt management should reconcile the search for lower financing costs and longer maturities, with the need to support the development of a robust and liquid domestic debt market.

According to the Fund, the central bank's recent measures for further alignment with EU standards and the increased frequency of on-site inspections should help contain risks from large exposures and related-party lending.