Washington, DC: An International Monetary
Fund (IMF) team led by Ms. Anke Weber conducted a staff visit to Albania
during July 9-12, 2024, to discuss recent macroeconomic developments, the
economic outlook, and policy priorities.
At the end of the visit, Ms. Weber issued the following statement:
“The Albanian economy grew by 3.5 percent in 2023 led by resilient private
consumption, with notable strength in tourism and construction activity.
Fiscal and external sector performance surpassed expectations with a
primary surplus and current account deficit of 0.7 percent and 1 percent of
GDP, respectively. Inflationary pressures have receded with headline
inflation declining to 2.1 percent in June, on the back of declining
commodity prices. The economy is expected to maintain its positive momentum
this year, with growth projected at around 3¼ percent. Inflation is
expected to gradually converge back to the 3 percent target.”
“Risks are broadly balanced. Stronger-than-expected tourism activity is an
important upside risk. Heightened geopolitical tensions represent a major
potential headwind, while the economy remains vulnerable to the risks of
weather-related energy sector shocks, and a sudden exchange rate reversal.
In the medium term, progress on reforms under the new EU growth plan for
the Western Balkans could boost potential growth, while demographic trends
represent a key downside risk.”
“The economic shocks in the last few years have underlined the importance
of rebuilding adequate fiscal buffers to ensure continued resilience to
future shocks. We welcome the authorities’ commitment to a prudent fiscal
policy, as reflected by the early and continued compliance with the fiscal
rules under the Organic Budget Law. We underline the importance of an
ambitious medium-term fiscal consolidation and prudent debt management to
reduce gross financing needs and safeguard fiscal sustainability. Such a
consolidation should be supported by measures to boost revenue
mobilization, generate efficiency gains, and raise productive spending.”
“Continued progress in fiscal reforms remains critical for the credibility
of the fiscal framework. We look forward to the adoption of the Medium-Term
Revenue Strategy by the end of this year. Albania would benefit from a tax
system underpinned by comprehensive coverage, fair rules, and the right
incentives to ensure an equitable burden among taxpayers. In this context,
the new income tax law helped make the taxation system fairer and more
evenhanded by ensuring that free professionals would be taxed in a manner
comparable to other employed taxpayers. Revenue mobilization measures to
increase the tax base, including property tax reforms, remain important.
We welcome the adoption of the Public Finance Management Strategy, and call
for the full operationalization of a strengthened public investment
management framework, as well as further progress in public-private
partnership (PPP) reforms. In this regard, the completion and issuance of
the 2022 and 2023 annual reports on PPPs and concessions are welcome, and
we encourage timely publication of future reports. The pilot standalone
Fiscal Risk Statement is a key step in bolstering fiscal risk management.
Furthermore, concrete progress on enhancing governance and oversight of
state-owned enterprises continues to be crucial for safeguarding fiscal
sustainability.”
“The current monetary stance is appropriate with price pressures from wage
increases likely to be tempered by lower imported inflation due to an
appreciated lek. The authorities should continue to monitor price
developments closely and maintain a data-dependent approach to monetary
policy. Moreover, a floating exchange rate should be the main shock
absorber. Continued nimble supervision and enhanced prudential tools will
help tide the economy through financial and economic uncertainties.
Progress on financial reforms should continue, including in further
bolstering supervisory and regulatory frameworks and deepening financial
markets. Against the backdrop of strong credit growth, the Bank of
Albania’s recent decision to increase the countercyclical capital buffer is
appropriate, and introducing a systemic risk buffer could further enhance
resilience. Efforts underway to strengthen consumer protection regulation,
including for non-bank financial institutions, are key to preserving the
integrity of, and trust in, the financial system. In addition, with more
than a decade having lapsed since the last Financial System Stability
Assessment, we encourage the authorities to consider a new Financial Sector
Assessment Program. Overall, preserving the independence of the Bank of
Albania is crucial to safeguarding price and financial stability.”
“The team would like to take this opportunity to express its appreciation
for the constructive discussions and fruitful exchange of views with the
authorities and other counterparts in Albania. The IMF mission for the 2024
Article IV consultation is expected to take place in November.”
