## IMF Executive Board Concludes 2023 Article IV Consultation with Albania _IMF News, January 12, 2024_ ## Source details **Canonical URL:** [IMF Executive Board Concludes 2023 Article IV Consultation with Albania](https://www.imf.org/en/news/articles/2024/01/12/pr23007-albania-imf-exec-board-concludes-2023-art-iv-consult) ## Other formats - [Markdown version](/en/news/articles/2024/01/12/pr23007-albania-imf-exec-board-concludes-2023-art-iv-consult/index.md) - [Structured JSON version](/en/news/articles/2024/01/12/pr23007-albania-imf-exec-board-concludes-2023-art-iv-consult/index.json) - [Bundle manifest](/en/news/articles/2024/01/12/pr23007-albania-imf-exec-board-concludes-2023-art-iv-consult/bundle-manifest.json) ## Bibliographic details - Published: January 12, 2024 --- ### Economic performance and outlook - Real GDP growth: close to 5 percent in 2022; projected at 3.6 percent in 2023 and 3.3 percent in 2024. - Growth drivers: strong rebound in tourism, robust private consumption, services, and construction activity; tourist arrivals and electricity production in the first ten months of 2023 are more than one-third above the levels recorded during the same period last year. - Recent growth: Real GDP grew by around 3¼ percent y/y in Q2 2023 following robust growth in Q1 2023. - Inflation: peaked at around 8 percent; hovering around 4 percent in 2023; expected to revert gradually to the 3 percent target by early 2025. - Risks: heightened geopolitical tensions, weather-related energy sector shocks, sudden reversal of exchange rate appreciation, and more persistent inflation. ### Fiscal policy and public debt - Assessment: a meaningful revenue-based fiscal consolidation starting in 2024 is critical to build fiscal space for future countercyclical policy. - Recommended measures: additional frontloaded cumulative net fiscal measures of around 1½ percent of GDP would bring public debt on a clear downward path and lower gross financing needs. - Consolidation composition: through a sound revenue mobilization strategy, coupled with efficiency gains and reallocation of resources to infrastructure, education, and climate adaptation. - Debt management: continue to lengthen debt maturities and reduce reliance on floating rate debt. - Governance and contingent liabilities: concrete advances on fiscal reforms that enhance governance and oversight of SOEs, including in the energy sector, and PPPs are key to safeguarding fiscal sustainability. ### Monetary policy and exchange rate - Monetary stance: Bank of Albania appropriately resumed monetary tightening in November 2023; returning inflation to target will likely require some further increases in the policy rate. - Policy-rate guidance: a gradual increase of the policy rate to a broadly neutral stance—estimated at around 4½ percent—should help allow inflation return to target by early 2025. - Rate-setting approach: uncertainty around the inflation path remains high and a flexible meeting-by-meeting approach to rate-setting is appropriate. - Exchange rate regime: a flexible exchange rate should remain the first line of defense against external shocks; vigilance is needed given potential for a sudden reversal. - Macroprudential and de-euroization measures: enhance preemptive macroprudential policies, including differential LTV and DTI requirements for domestic and FX loans; further de-euroization efforts, supported by government action to promote the use of local currency as the legal tender. ### Financial sector resilience and supervision - System resilience: banking system overall appears more resilient, but some pockets of vulnerabilities exist. - Recommendations: strengthen the capital positions of some banks, prudent provisioning, focused asset quality reviews. - Countercyclical buffer: over the medium-term, a positive neutral countercyclical capital buffer rate could be considered to support financial stability. - Regulatory alignment: further progress on aligning supervision and regulation with EU standards, operationalizing insolvency and resolution frameworks, strengthening governance, and deepening capital markets to support durable credit growth. ### Structural challenges and reform priorities - Key impediments to productivity and living standards: widespread informality; weaknesses in governance and the rule of law; significant gender gaps in labor force participation; high youth inactivity; infrastructure gaps. - Demographic and labor risks: high emigration rate of workers and population aging pose additional threats to growth. - EU accession opportunity: seize momentum of EU enlargement to address long-standing structural challenges. - Justice and AML/CFT: judicial reforms should be complemented by increased efficiency to address the backlog in cases; sustain robust commitment to AML/CFT reforms and best practices following exit from FATF’s list of countries under increased monitoring. - Labor participation: addressing gaps in youth and female labor force participation will help lift potential growth. - Implementation: adequate budget resources and monitoring mechanisms are needed to ensure reform efforts translate into better outcomes. ### Executive Board decision - The Executive Board concluded the 2023 Article IV consultation with Albania and considered and endorsed the staff appraisal without a meeting on a lapse-of-time basis. - It is proposed that the next Article IV consultation be held on the standard 12-month cycle. ### Albania: Selected Economic Indicators (as presented) - Population: 2.8 million (2022) - Per capita GDP ($): 6743 (2022) - Life expectancy (years): 76.5 (2022) - Literacy rate: 99% (2022) - Nominal GDP ($bn): 18.9 (2022) - Poverty rate: 25.2% (2022) - Quota: SDR 139.3 million (0.03 percent of total) - Output (Real GDP growth %): 2020: -3.3; 2021: 8.9; 2022: 4.8; 2023 Proj.: 3.6; 2024 Proj.: 3.3 - Output gap (%): 2020: -5.8; 2021: -0.4; 2022: 1.0; 2023 Proj.: 0.8; 2024 Proj.: 0.5 - Employment (Unemployment rate %): 2020: 11.7; 2021: 11.4; 2022: 11.1; 2023 Proj.: 11.0 - Prices (Inflation %, average): 2020: 1.6; 2021: 2.0; 2022: 6.7; 2023 Proj.: 4.0 - Prices (Inflation %, end-period): 2020: 1.1; 2021: 3.7; 2022: 7.4; 2023 Proj.: 3.8 - General government finances (Revenues % GDP): 2020: 25.9; 2021: 27.5; 2022: 26.8; 2023 Proj.: 28.0; 2024 Proj.: 27.4 - General government finances (Expenditures % GDP): 2020: 32.6; 2021: 32.1; 2022: 30.4; 2023 Proj.: 30.2; 2024 Proj.: 29.9 - Fiscal balance (% GDP): 2020: -6.7; 2021: -4.6; 2022: -3.7; 2023 Proj.: -2.2; 2024 Proj.: -2.5 - Public debt (% GDP) 1/ 2/: 2020: 75.8; 2021: 75.2; 2022: 65.5; 2023 Proj.: 61.1; 2024 Proj.: 60.4 - Primary balance (% GDP): 2020: -2.7; 2021: -1.8; 2022: 0.0; 2023 Proj.: 0.2 - Money and credit (Broad money % change): 2020: 10.5; 2021: 8.6; 2022: 5.2; 2023 Proj.: 6.4 - Money and credit (Credit to the private sector % change): 2020: 7.0; 2021: 4.3 - Policy rate (%, end-period): 2020: 2.8 - Balance of payments (Current account % GDP): 2020: -8.7; 2021: -7.7; 2022: -6.0; 2023 Proj.: -3.5; 2024 Proj.: -4.4 - Balance of payments (FDI % GDP): 2020: -6.5; 2021: -6.6; 2022: -7.1; 2023 Proj.: -7.2 - Reserves (months of imports): 2020: 9.6; 2021: 8.8; 2022: 6.9; 2023 Proj.: 6.5; 2024 Proj.: 6.1 - External debt (% GDP): 2020: 64.2; 2021: 64.3; 2022: 54.3; 2023 Proj.: 51.5; 2024 Proj.: 48.7 - Exchange rate (REER % change): 2020: 0.6; 2021: -0.5 *Executive Board of the International Monetary Fund press release, January 12, 2024.* --- ## References - [https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg) - [The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx) - [Albania and the IMF](http://www.imf.org/external/country/alb/index.htm) - [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance) - [Press Releases](https://www.imf.org/en/news/searchnews) - [PRESS CENTER](http://presscenter.imf.org/) - [https://www.imf.org/en/home](https://www.imf.org/en/home) _Source: https://www.imf.org/en/news/articles/2024/01/12/pr23007-albania-imf-exec-board-concludes-2023-art-iv-consult_