IMF Issues Mission Statement For Albania In March 2018; Asks For More Reforms

Based on Article IV of the Article of Agreements of IMF, during March 2018, an IMF mission visited Tirana, with the aim of evaluating economic developments for the Post-Program Monitoring (PPM) discussions. Albania, which has been a member of the IMF since 1991, has received substantial IMF credit. The PPM process commences after the expiration of these programs, with a special focus on vulnerabilities and risks.

The statement issued by the mission emphasized the stability of the macroeconomic and political environment in Albania. It deemed financing conditions to be extremely favorable as inflation and interest rates remain very low. The GDP growth of 3.9% in 2017 and the estimated growth of 3.7% in 2018 make Albania the fastest growing economy in the region.

The mission states that investment and exports are increasing, supported by the strong economic recovery in EU trading partners. The foreign exchange reserves of the Bank of Albania are comfortable and supported by six months' import cover. The banking sector has been evaluated to be stable, liquid, and profitable, but the large number of NPLs and difficulties in collateral execution are weighing it down. Banks recorded a decrease of 13.2% of loans at the end of 2017 mostly due to write-offs and restructuring. It is expected that there will be an acceleration of the collateral execution due to the latest legal measures, mainly the success fees for bailiffs and the regulation of out-of-court agreements.

The IMF draws attention to the fact that the current economic growth momentum may not last long. The cyclical EU recovery and the possible global risks could lower the confidence and growth and may negatively impact Albania through trade, investment, and banking channels. Additional internal influencing factors include the increase of contingent liabilities; public debt and fiscal shortfalls as well as lack of...