Moody's revises Albania's outlook upward, changing it to "positive"

2024-04-20 10:39:00, Ekonomi CNA

Moody's revises Albania's outlook upward, changing it to

The international credit rating agency "Moody's" has changed Albania's perspective to "positive" from "stable", in the last revision, published on April 19, 2024. The "positive" perspective reflects the possibility of a better fiscal scenario than expected, which could result in a sustainable improvement of Albania's fiscal strength.

The agency states that Albania maintained macroeconomic stability through three consecutive shocks in recent times, including the 2019 earthquake, the COVID-19 pandemic and the 2022 energy crisis.

The agency estimates that the ratio of public debt to GDP returned to a stable downward trajectory in 2022, fully offsetting the increase in debt over the period 2019-2021. Moody's expects the debt-to-GDP ratio to decrease to 56.3% in 2024 from 59.2% in 2023. Beyond this year, Moody's expects the debt-to-GDP ratio to remain on a steady downward trajectory, thanks to of expected primary surpluses and a stable GDP growth.

Moody's expects the authorities to comply with the fiscal rules set out in the Organic Budget Law, which include a primary balance not lower than zero and a reduction of the public debt-to-GDP ratio every year until it reaches 45% of GDP- of.

The agency is of the opinion that the decline in debt is expected to be driven by ongoing fiscal reforms, including the medium-term revenue strategy and improvements in public investment management. The positive impact of these reforms may exceed the agency's current expectations.

The agency estimates that the significant improvement in the current account balance recently is expected to be structural, with only small deficits projected for the years 2024-2025, supported by the tourism boom and the increase in remittances.

The agency is of the opinion that steady flows of foreign direct investment in tourism and energy, improvements in productivity, as well as increased labor force participation support a positive medium-term economic outlook. The agency forecasts a real GDP growth of 3.5% in 2024.

According to the agency's assessments, the banking system remains strong and highly liquid.

The agency is of the opinion that Albania's credit profile will also benefit from the gradual implementation of further reforms related to the EU accession process. The pace of reforms is likely to strengthen as EU accession talks progress. Further economic integration with the EU, Albania's largest trading partner, is likely to improve the growth potential of its economy in the medium term and eventually further narrow the gap in income levels with EU member states. .

The Reform and Growth Plan for the Western Balkans, which was approved by the European Commission in November 2023, with support from EU pre-accession funds and investments under the Western Balkans Investment Framework (WBIF), will support the implementation of further institutional reforms in Albania as well and the convergence of income per inhabitant with the levels of EU countries, predicts Moody's./ CNA