Euromoney says Albania’s risk rankings have improved since its government has started to reform its judiciary and police force and most likely enter formal EU membership talks with the European Commission this June.
Euromoney notes that improving risk on a total risk score of just 38 points from a maximum 100 available in the survey, Albania is still a high-risk borrower within the fourth of Euromoney’s five risk categories. However, its score and ranking have improved, pushing Albania higher to 89th out of 186 countries surveyed, above FYR Macedonia – now two places below – and with similar EU ambitions to Serbia (75th) and Montenegro (112th).
Albania would be a higher, tier-three risk were it not for concerns about non-performing loans (NPLs) in the banking system, a tricky investor climate and large public debt burden. Exacerbated by liabilities linked to the use of public-private partnerships, and with some liabilities in arrears, the debt burden makes state-owned enterprise reforms, better debt management and tax changes urgently required.
Short-term prospects, moreover, are hindered by the winding down of large-scale energy projects potentially softening GDP growth, while the country is vulnerable to worse scenarios involving financial meltdown, political crisis or a transatlantic trade war.
However, Euromoney says that Albania’s rise is unlikely to stop long-term. The country is enjoying one of the fastest annual growth rates in the region – the latest figures showing 3.6% in the third quarter of 2017 – with a good deal of stability in the political and economic environment fuelling improving economic scores for the growth outlook and regulatory and policymaking environment, among others.
Dimitria Rotsika, senior economist at Piraeus Bank Group, is one of several Euromoney survey contributors with a generally favourable impression of Albania’s prospects.
“The country has been showing steady signs of a strong momentum, with radical structural reforms already paving the way of a new growth model,” she says. “The combination of relatively high economic growth in the coming few years, fiscal consolidation and correction of the banks’ NPL balances is positive for the country’s aim of future EU accession.”
Further reforms hold the key to Albania’s prospects and receiving its allocated pre-accession funding. The debt is high, and the country must continue to grow briskly, but with the political will, and EU accession targeted, the country will stay on a steadily improving trajectory.