Albania: 2024 Staff Visit Press Release

IMF News, July 15, 2024

Source details

Press Release No. 24/274; July 15, 2024.
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.
The views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board. This mission will not result in a Board discussion.
IMF Communications Department media contact: PRESS OFFICER: Eva Graf; Phone: +1 202 623-7100; Email: MEDIA@IMF.org; @IMFSpokesperson.

Albania 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 in 2023:
- primary surplus of 0.7 percent of GDP.
- current account deficit of 1 percent of GDP.
Inflation and recent developments:
- headline inflation declined to 2.1 percent in June, on the back of declining commodity prices.
Near-term projection:
- The economy is expected to maintain its positive momentum in 2024, with growth projected at around 3¼ percent.
- Inflation is expected to gradually converge back to the 3 percent target.

Risks are described as broadly balanced.
Upside risk:
- Stronger-than-expected tourism activity.
Downside risks:
- Heightened geopolitical tensions as a major potential headwind.
- Vulnerabilities to weather-related energy sector shocks.
- Risk of a sudden exchange rate reversal.
- Demographic trends represent a key downside risk in the medium term.
Reform-related upside:
- Progress on reforms under the new EU growth plan for the Western Balkans could boost potential growth.

Key emphasis:
- Importance of rebuilding adequate fiscal buffers to ensure continued resilience to future shocks.
- Welcome for authorities’ commitment to a prudent fiscal policy and early and continued compliance with the fiscal rules under the Organic Budget Law.
Recommended fiscal strategy:
- Ambitious medium-term fiscal consolidation and prudent debt management to reduce gross financing needs and safeguard fiscal sustainability.
- Consolidation should be supported by measures to boost revenue mobilization, generate efficiency gains, and raise productive spending.
Fiscal framework and transparency:
- Continued progress in fiscal reforms is critical for the credibility of the fiscal framework.
- Expectation for adoption of the Medium-Term Revenue Strategy by the end of this year.
- Welcome for adoption of the Public Finance Management Strategy and call for full operationalization of a strengthened public investment management framework.
- Support for further progress in public-private partnership (PPP) reforms.
- Completion and issuance of the 2022 and 2023 annual reports on PPPs and concessions are welcome; timely publication of future reports is encouraged.
- The pilot standalone Fiscal Risk Statement is a key step in bolstering fiscal risk management.
- Concrete progress on enhancing governance and oversight of state-owned enterprises continues to be crucial for safeguarding fiscal sustainability.

Tax system goals:
- A tax system underpinned by comprehensive coverage, fair rules, and the right incentives to ensure an equitable burden among taxpayers.
Recent measures and priorities:
- 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.

Monetary stance:
- The current monetary stance is appropriate; price pressures from wage increases likely to be tempered by lower imported inflation due to an appreciated lek.
- Authorities should continue to monitor price developments closely and maintain a data-dependent approach to monetary policy.
- A floating exchange rate should be the main shock absorber.
Financial sector policies:
- Continued nimble supervision and enhanced prudential tools will help tide the economy through financial and economic uncertainties.
- Progress on financial reforms should continue, including 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.
- Introducing a systemic risk buffer could further enhance resilience.
- Efforts to strengthen consumer protection regulation, including for non-bank financial institutions, are key to preserving the integrity of, and trust in, the financial system.
- With more than a decade having lapsed since the last Financial System Stability Assessment, the authorities are encouraged to consider a new Financial Sector Assessment Program.
- Preserving the independence of the Bank of Albania is crucial to safeguarding price and financial stability.

The IMF team expressed appreciation for constructive discussions and exchanges with the authorities and other counterparts in Albania.
The IMF mission for the 2024 Article IV consultation is expected to take place in November.

International Monetary Fund: Albania: 2024 Staff Visit Press Release (Press Release No. 24/274), July 15, 2024.

Shqipëri: Njoftimi për Shtyp i Vizitës së Stafit për vitin 2024
- Shqipëri: Njoftimi për Shtyp i Vizitës së Stafit për vitin 2024 (Markdown version)
- Shqipëri: Njoftimi për Shtyp i Vizitës së Stafit për vitin 2024 (PDF)