Moody’s published the latest review on the Albanian economy, by confirming its rating at B1 level. The economic development of the country remains stable, according to the analysis. By affirming the B1 bond rating of the Albanian government, it is notable that Albania has improved its economic performance due to several reasons. The close collaboration of Albania with the IMF and the winning of EU candidate status have had their positive impact, especially to increase foreign investments.
One of the main reasons of this rating relates to the adoption of the fiscal consolidation measures based on a three year extended agreement with the IMF. These measures have served as an initial response to the bad fiscal situation in 2013, mostly for the increase of revenues during this period.
The recognition of previously undisclosed outstanding debts is likely to increase the 2014 fiscal deficit to 6.7% of GDP, the payment of these outstanding debts and other upaind bills are positive signs and allow companies to repay outstanding bank loans. This will help to alleviate tight lending standards amid a non-performing loan ratio (NPL) ratio of 24.1% as of Q1 2014. Moody’s expects the public debt ratio to peak this year at over 74% of GDP before declining thereafter.
Another reason of Moody’s conclusions relates to the winning of EU candidate status, a development that shows the effective war of Albania in fighting corruption and in the so-far successful implementation of reforms in the judiciary system. According to the report, being a candidate state for EU membership, will help Albania to increase FDIs.
The sooner and successful implementation of structural reforms and the improvement of business climate would raise the government’s rating, according to Moody’s review. Moody’s warns for stabilization of the fiscal deficit and public debt at a time when remittances have decreased.