Press Release No. 15/312

Press Release: Statement by an IMF Mission to Albania

June 30, 2015

An International Monetary Fund (IMF) mission led by Nadeem Ilahi visited Tirana during June 17-30, 2015 to conduct discussions on the fifth review of Albania’s Extended Fund Facility (EFF) arrangement. On the conclusion of the visit, Mr. Ilahi made the following statement:

“Albania's economic program continues to make progress. Economic growth is projected to continue its moderate recovery in 2015, reaching between 2.5 and 3 percent. Growth will be driven by a sustained recovery in domestic demand, continued Foreign Direct Investment, and a gradual pickup in bank lending. Inflation is expected to stay low, in part because output still remains below potential. 

“Spillover risks from the Greek crisis are low. The banking sector is highly liquid and well capitalized, including the subsidiaries of Greek banks. Remittances may be affected by developments in Greece, but have been declining in importance over the past few years. Exports to Greece are not sizable.

“There has been a shortfall in tax revenues in the January-May period compared to the budget, because of lower oil prices and production and weakness in tax compliance and administration. The authorities have communicated their commitment to achieving the fiscal deficit target for 2015. Fiscal consolidation has to continue in 2016 to ensure Albania is moving on a path to debt sustainability. Discussions will continue for the completion of the fifth review of the EFF.

“Monetary policy should continue to be supportive of economic recovery, consistent with the Bank of Albania’s mandate of maintaining price stability. Credit growth is recovering but remains low, affected by high non-performing loans (NPLs) and weaknesses in contract enforcement. The government together with the Bank of Albania is developing a comprehensive strategy for resolving the NPL issue.

“Implementation of power sector reform has been good and will ease the fiscal burden this year. Electricity theft has been reduced substantially and reforms of the state-owned electricity companies are proceeding as planned. Sustaining the reform effort is critical in weaning the sector away from state support.

“Albania's 36-month EFF arrangement was approved on February 28, 2014 (see Press Release 14/81).”