This report covers the main macroeconomic releases from late September until mid-October and financial and political events that took place in Albania during this period.
Albania scored a big victory this month after the European Commission recommended granting the country EU candidate status while stressing it must continue to fight organized crime and corruption. In its 2013 Progress Report on Albania published on October 16, however, the commission said that in order to be able to move to the next stage and open accession negotiations, Albania needs to meet further key priorities, with particular focus on administration reform, the rule of law and fundamental rights, the EC said adding that constructive and sustainable political dialogue will remain essential for a successful reform process.

On the macroeconomic front things are not as bright as the IMF cut its estimate for Albania’s 2013 economic growth to 1.7% from 1.8% expected earlier. Next year’s GDP forecast was also revised down to 2.1% from 2.5%. Austria’s Raiffeisen International kept this year’s GDP outlook for Albania saying it expects the economy to grow by a real 2% year on year but cut its projection for 2014 to 3%. Albania’s GDP expanded by 1.1% year on year in non-adjusted terms in the second quarter of 2013, slowing down from a 1.7% annual growth in the first three months of the year. The seasonally-adjusted figures showed a 1% quarter-on-quarter increase in Q2 following a 0.1% quarter on quarter rise in Q1.

The IMF expects the government’s fiscal position deteriorate sharply in 2013, with budget deficit rising 2.3pps year on year to 5.5% of GDP. The gap will further increase to 6.3% of GDP in 2014. According to the latest finance ministry data, the country’s general budget deficit expanded by 129.2% year on year to ALL 54.4bn (EUR 385.7mn) in January to August 2013 and equalled to 3.8% of the projected full-year GDP. The government targets to narrow the budget gap to 3.4% of the GDP in 2013 from 3% in 2012 and for the purpose it approved a set of restrictive measures including freezing of public procurement and investments, which after July 15 are implemented only through a special decision of the cabinet. In addition, the government reduced the expenditure on administrative services by 20%.

Consumer prices in the country grew by 1.7% year on year in September, accelerating from 1.2% in August, with the overall trend again determined by food prices.